The European Central Bank kept interest rates unchanged at 2 per cent today for the 11th straight month as global recovery and a softer euro give some lift to the euro zone economy.
Financial markets largely ignored the decision, which had been widely flagged by ECB policy makers in recent weeks. With export demand reviving and the manufacturing sector perking up, the euro zone appears poised to accelerate.
Chances for an ECB rate cut seem to be dwindling as a global rebound broadens and even European politicians have become less vocal in their appeals for cheaper money. The Bank of England raised its rates by a quarter point earlier on Thursday, while the US Federal Reserve said it is preparing for credit tightening.
Money markets are pricing in an ECB rate hike by the end of the year, possibly as early as September. But some economists are less certain, citing the risks from higher oil costs and stagnant consumer demand while unemployment climbs.
Focus will now shift to what ECB President Jean-Claude Trichet has to say on the economy in his news conference this afternoon.