The European Central Bank held interest rates at 4 per cent today as expected, brushing off calls to help avert a sharp worldwide economic slowdown by cutting borrowing costs.
But expectations are growing that the ECB will join the US Federal Reserve, the Bank of England and the Bank of Canada by lowering rates later this year.
Financial markets are betting that gloomy economic data could prompt three cuts this year, with the first move possible as early as April.
The ECB said banks expected credit standards to tighten in all three main areas it looks at - business loans, mortgages and consumer loans, the ECB said.
Analysts say ECB rates are unlikely to stay at 4 per cent for long. Futures markets moved aggressively on Tuesday this week to price in earlier-than-expected ECB easing, discounting 75 basis points of cuts by the year-end.
This followed data showing a surprise drop in services sector growth and retail sales across the 15-nation bloc.
Futures are attaching a one in five chance that the ECB will start its rate-cutting cycle as early as next month.