The European Central Bank (ECB) left interest rates unchanged today as policymakers await clear signs that the euro zone's economic recovery is on a solid footing.
This leaves the benchmark interest rate at a record low of 2 per cent for the 20th month in a row, as predicted by economists in a Reuters poll. There was little market reaction to the move.
The ECB's Governing Council made the decision a day after the US Federal Reserve raised its key interest rate by another quarter percentage point to 2.5 per cent, its sixth rise since last June.
Analysts expect the ECB to lift rates to a more normal level to head off future inflation pressures once the economy proves it has recovered from a softer patch in the second half of 2004, probably in the second half of this year.
Services and manufacturing activity both picked up in January but the jury is still out on whether signs of renewed momentum will continue.
ECB President Mr Jean-Claude Trichet will hold a press conference later today but economists expect little change in tone since the last meeting three weeks ago.
Adding to the case for a rise this year are indicators of a pick-up in services and manufacturing activity. The services sector expanded at its fastest pace in three months in January, matching the pick-up in the purchasing managers' index for manufacturing released earlier in the week.
Business and consumer confidence is also firming, and the euro zone jobless rate also edged up to 8.9 per cent in December.