The governors of the European Central Bank (ECB) met yesterday to discuss the international financial crisis, but concluded that no immediate policy action was necessary.

The central bank governors will hold another meeting on Friday next week, where they are expected to announce the ECB's future monetary policy strategy. The ECB said there would be a news conference after next week's meeting.

Mr Alfons Verplaetse, the Belgian central bank governor, said the Russian situation had no impact on the ECB's monetary policy "at this point in time".

The political sensitivity of yesterday's meeting was underlined by the presence of Mr Rudolf Edlinger, finance minister of Austria, current holder of the European Union's rotating presidency, and Mr Yves Thibault de Silguy, the European monetary affairs commissioner.

Deutsche Bank, Europe's largest financial institution, is now considering changing its forecasts for of European interest rates.

The bank's economists believe it is likely that short-term European interest rates - currently at 3.3 per cent in Germany and France - will remain at that level until the end of 1999. The bank is currently predicting short-term interest rates rising to 3.5 per cent.

There is growing nervousness among Germany's financial establishment, which largely ignored international financial contagion until Russia's recent effective default and the devaluation of the rouble.

Mr Peter Cornelius, a senior Deutsche Bank economist, said about 40 per cent of the world economy was either in recession or in the midst of an economic downturn - including Britain.

European central bankers still vividly remember the 1987 stock market crash, and the ensuing inflationary monetary policies in the US and Britain. They are keen to avoid overreacting by keeping interest rates excessively low for too long.

The Bundesbank still suffers from critics who blame the 1987 crash on comments by Mr Helmut Schlesinger, then its deputy president.