European Central Bank keeps interest rate steady

The European Central Bank has surprised markets by leaving its key interest rate unchanged.

Economists had largely expected the Euro-bank to trim its main interest rate of 4.75% by at least 0.25% amid mounting criticism that it was doing too little to shield Europe from a global slowdown.

But some ECB policymakers had suggested that the Frankfurt-based bank would stick to its "wait-and-see" policy.

Fear that the ECB was reacting too slowly helped push the euro below 89 cents against the dollar yesterday, its lowest point in a week. Immediately after today's announcement, the euro plunged by nearly half a cent.

A gathering world slowdown has already forced the US Federal Reserve and the Bank of Japan to cut rates this year to try to spur their economies by making it cheaper for businesses to borrow money for expansion.

Speaking before the Euro-bank announced its decision, economist Nigel Anderson, of the Royal Bank of Scotland, said: "The ECB faces a potential credibility problem.

"We can see from the data that the economy is clearly deteriorating. But by keeping rates unchanged, the ECB risks looking like it doesn't notice, or just doesn't care."

Today's decision to hold steady now shifts focus to the ECB's next regular meeting on April 26, when most economists expect a rate cut.

Worries that the global slowdown will spill over into the 12 European nations sharing the euro have triggered a spate of pleas to ease interest rates in Europe.

In the past week, the International Monetary Fund, the World Bank and German Finance Minister Hans Eichel, who normally steers clear of ECB politics, had added their voices to the calls for a cut.