The European Central Bank held its key interest rate steady today despite inflationary pressures from high oil prices, but cautioned that “strong vigilance” was needed on rising costs.

Chancellor Gerhard Schroeder remained defiant today after Germany and France faced down a threat of EU sanctions over their ballooning budget deficits, angering smaller member nations and sparking concern about the euro’s stability.

Economic figures published next week are expected to show Europe's major economies are on the road to recovery.

The cost of borrowing in the US is expected to come down sharply tonight, in a move that could boost hopes of an April interest rate cut in the UK.