ECB leaves interest rates on hold at 1% Eurozone interest rates have been left unchanged at the record low of 1 per cent by the European Central Bank as the 17-country region struggles to return to economic growth. The decision, which was widely expected, came amid signs that the eurozone is stuck in recession, with economic activity contracting sharply in much of southern Europe. The ECB's task has been complicated, however, by widening eurozone divergences and the robustness of Germany's economy, the region's largest, where unemployment has fallen to record lows and the Bundesbank has expressed fears about inflationary pressures. Jens Weidmann, Bundesbank president, has called for the ECB to prepare an "exit strategy" for unwinding crisis-combating measures, including more than €1tn in three-year loans provided by the ECB to eurozone banks. But Mario Draghi, ECB president, is not expected to signal that implementation of such a strategy is imminent. Late last year, as the eurozone debt crisis intensified, the ECB cut interest rates back to the low levels seen during 2009"s deep recession. A month ago, Mr Draghi observed "signs of stabilisation" in the eurozone economy and foresaw a gradual recovery during 2012. Revised eurozone purchasing managers" indices released ahead of Wednesday's meeting indicated activity had weakened in March. The "composite" index, covering manufacturing and services, dropped from 49.3 in February to a three-month low of 49.1. A figure below 50 represents a contraction of activity. However, the eurozone downturn was "currently only mild," according to Chris Williamson, chief economist at Markit, which produces the indices. With economic confidence higher in the service sector than late last year, "the recession may also be brief" he added. Nevertheless, Mr Draghi is likely to stress the uncertainty over the economic outlook. High oil prices have added to sweeping fiscal austerity measures across Europe as a brake on growth. Meanwhile, the €1tn in three-year loans provided by the ECB have shown scant signs of triggering a revival in bank lending to businesses or consumers. Financial market jitters have also increased over the Spanish economy, which has seen its borrowing costs rise again. The ECB has also been concerned at Madrid's apparent defiance of the eurozone's new "fiscal compact" - which Mr Draghi has argued is essential to restoring confidence in Europe's monetary union. Higher energy prices have also left eurozone inflation remaining stubbornly high. At 2.6 per cent in March, the annual rate was clearly above the ECB's target of "below but close" to 2 per cent over the medium term. The ECB argues it only needs to act if there are signs of higher headline inflation rates feeding through into higher wage demands and other prices. So far there is little sign of that happening - except possibly in Germany.