No rate change at unfazed ECB

The European Central Bank yesterday shrugged off growing fears that the eurozone's fledgling recovery is about to peter out when it left interest rates on hold, at 2%.

Surprising the markets with its wait and see approach, the ECB stuck to its view that the pick-up in the global economy will gradually feed through into stronger activity in Europe this year.

Jean-Claude Trichet, the ECB's president, rejected calls for cheaper borrowing from policymakers in Germany and France anxious about the pace of recovery.

"The situation doesn't call in any respect for a change of our interest rate, and we will see during the next meetings whether or not there are informations that will call for any change," Mr Trichet told a press conference in Frankfurt.

He added that there were mixed signals about the economy but sought to damp down speculation about lower borrowing costs. "On balance, there is currently no evidence challenging the assessment of continued, though modest" economic growth, Mr Trichet said.

The euro gained ground on the foreign exchanges after the ECB's announcement as dealers became less confident about the bank sanctioning easier monetary policy over the coming months. Some analysts believed the weakness of German growth coupled with the possible impact of the Madrid terrorist bombs on consumer confidence would prompt the ECB into the first cut in rates since last summer.

"It's not dovish at all, not giving any indication that they are in a position to cut rates or that a rate cut is coming," said Aziz McMahon, a currency strategist at ABN Amro in London.