Pressure on the European Central Bank to cut interest rates to spur economic growth grew yesterday. There were even calls from a prominent German economist for the ECB, which is meeting in Frankfurt today, to cut interest rates by a half a percentage point. The call from Mr Jurgen Kromphardt, one of Germany's panel of so-called "Five Wise Men" - independent economic advisers - came after news that both the state-funded German economic institutes and the OECD have cut back forecasts for German and euro-zone growth this year.

The OECD has lowered its growth forecast for the euro zone, citing slower growth in the US. It is now predicting growth of 2.7 per cent from 3.1 per cent.

German think tanks say domestic economy will grow by 2.1 per cent this year for the same reason, revising down an earlier forecast of 2.7 per cent. Growth next year would also be 2.1 per cent, they said. The government uses these forecasts to shape its own outlook and to estimate tax revenue.

The institutes called for lower rates. The ECB "should cut rates in the first half of the year amid expectations of weakening economic growth and receding inflation", they said. Lowering interest rates to 4.25 per cent would "be justified", they added. According to Dr Dan McLaughlin, chief economist at Bank of Ireland, a half-point cut would really boost confidence. However, he added that the ECB may not be prepared to go that far.

Some analysts warned the ECB may still focus on inflation, which is still running slightly higher than its official ceiling, and hold off on rate cuts for the time being.

Bundesbank president Mr Ernst Welteke highlighted this yesterday when he called for a "steady hand".

According to Mr Aziz McMahon, economist at Ulster Bank, the ECB is highly unlikely to cut rates. "It is only targeting inflation and cannot do anything," he said.

The markets expect the ECB to act soon. Three-month interest rates stand around 4.48 per cent, which would imply a quarter of a percentage point cut from the current rate of 4.75 per cent. However, the euro fell slightly yesterday as traders worried that a rate cut would not be forthcoming. The currency fell to as low as $0.8948 from $0.9017 a day earlier, before closing at $0.8883. The three-month rate also rose after Mr Welteke's comments.

Mr Kromphardt said in a magazine interview to be published later this week that a cut of half a percentage point would be "highly desirable" in the current environment. Anything less would not have any lasting effect "and everyone would say that the ECB doesn't know what it's doing", the economic expert argued.

The ECB is the only one of the world's major central banks which has not cut interest rates this year. The US Federal Reserve had already cut rates three times while the Bank of Japan has cut rates close to zero per cent to head off recession. The Bank of England also cut rates last week.

If the ECB "does not cut this week, it will have a lot of explaining to do", said Mr Julian Callow, an economist at Credit Suisse First Boston in London.