The European Central Bank (ECB) has ruled out a cut in interest rates, despite weaker than expected economic growth in the euro zone.

Speaking in Frankfurt yesterday after a meeting of the ECB's governing council left interest rates unchanged at 2 per cent, ECB president Jean-Claude Trichet made clear that the next move on interest rates would be upward.

"A decrease of interest rates is not an option for the governing council," he said.

Although the governing council did not discuss an increase in interest rates yesterday, Mr Trichet said the markets were aware that the ECB was ready to make such a move as soon as it becomes necessary to preserve price stability.

"They all know that, if needed, we will immediately increase interest rates," he said.

Mr Trichet said that high oil prices were dampening economic growth while pushing up prices in the euro-zone, where inflation is likely to be above the ECB's target of 2 per cent for much of this year.

"We are now at a level which is very high I would say it has an impact on both inflation and growth. It is the usual impact of an oil shock. This is something that is very unwelcome," he said.

Mr Trichet called on consumers to take steps to cut their energy consumption to minimise the economic impact of high oil prices.

He expressed concern about budget deficits in a number of euro-zone countries and called for a strict implementation of the revised rules of the Stability and Growth Pact.

"Although public finances remain sound in a few euro-area countries and fiscal consolidation is progressing slowly in others, in several countries fiscal perspectives are worrying, as imbalances are not projected to decline, as planned earlier, and in some cases are even forecast to rise," he said.