The European Central Bank ignored calls for lower interest rates in the 12-country euro zone, keeping the cost of borrowing in the single currency area steady at the bank's regular fortnightly meeting today.
Even though a number of observers have been calling for an easing in credit conditions to help counteract an expected slowdown in euro-wide growth this year, the ECB held the minimum bid rate for its regular refinancing operations steady at 4.75 percent.
And it also left unchanged its other two rates - the deposit rate at 3.75 percent and the marginal lending rate at 5.75 percent.
Euro-zone interest rates have remained unchanged since last October.
No rate changes had been expected from the bank so early in the year, even though a number of economists and ECB watchers expect the ECB to loosen the monetary screws in the coming months.
The euro therefore showed little reaction to the decision, and was changing hands at about 0.9411 dollars, the same level as shortly beforehand.
A surprise reduction in US interest rates two weeks ago in response to the sharp slowdown in economic activity on the other side of the Atlantic had further increased the pressure on the ECB to cut its key rates as well.
After all, a bumpy or even hard landing in the US economy would have a knock-on effect for the euro area, observers argued.
But the opponents to an ECB rate cut insist that the euro-zone economy is still in good shape and well-equipped to avert any large-scale fallout from slower US growth.
The German banking federation BdB said in a report published yesterday that "unlike US monetary policy, which is still restrictive even after the January rate cut, the current European monetary policy stance remains neutral for the economy".
Furthermore, euro-area growth was expected to slow only moderately and temporarily, unlike US growth, the federation said.
Tax reforms in a number of euro-zone countries would allow growth to gather momentum again during the second half of this year.
"Against this background, it is very likely that the ECB will keep rates unchanged in the coming weeks. Indeed, it might help calm the exaggerated nervousness on the financial markets with its 'steady-hand policy'," it said.
AFP