The European Central Bank kept interest rates steady today despite calls from top European politicians for lower borrowing costs to offset damage caused by the strong euro.
But markets are now on alert for any sign the central bank is leaning towards cheaper credit given that inflation is retreating and economic growth may falter in the months ahead.
The ECB said its Governing Council decided to leave the euro zone's key rate at 2 per cent. ECB President Jean-Claude Trichet explains that policy decision at a news conference starting at 1.30 p.m.
The euro lost over a quarter of a cent to trade at $1.2168 after the decision but remained above its lows for the day. The currency had fallen sharply this week on the monetary easing speculation.
The ECB action followed a similar decision by the Bank of England to keep its interest rate steady at 4 per cent.
The euro's rise in recent months has helped annual euro zone inflation to slow to 1.6 per cent in February from 1.9 per cent in January.
But the currency's strength was also blamed by some for a setback in key confidence and business indicators in the same month, stoking fears economic growth could stutter.