ECB maintains interest rate steady

The European Central Bank held its main interest rate steady at 4 percent as expected on Thursday amid rising inflation and slowing economic growth. The ECB has threatened to raise rates as workers demand bigger pay increases to compensate for the higher cost of living. Signs of slowing growth in the 15-nation euro region are staying its hand.

Economists nevertheless predict that slowing economic growth will prevent the ECB from raising rates this year. Of 52 analysts surveyed by Bloomberg News, only nine see an increase. Twenty- three forecast unchanged rates and 20 predict a reduction.

Growth will slow to about 2 percent in 2008 from around 2.6 percent last year, according to the ECB’s December forecasts. The bank predicts inflation will accelerate to about 2.5 percent this year from 2.1 percent in 2007. It would be the ninth successive year the ECB has failed to achieve its goal of keeping average annual price increases below 2 percent.