ECB leaves rates at 4 pct

The European Central Bank kept interest rates at 4.0 percent on Thursday as expected, as risks to economic growth are not yet big enough to overshadow the Governing Council’s worries about inflation.

The European Central Bank kept interest rates at 4.0 percent on Thursday as expected, as risks to economic growth are not yet big enough to overshadow the Governing Council’s worries about inflation.

ECB President Jean-Claude Trichet is due to comment on the competing threats of higher consumer prices and slower growth at 1330 GMT when he holds his monthly news conference and delivers a quarterly update to the bank’s economic projections.

All 72 economists polled by Reuters last week expected the ECB to leave rates unchanged. However, most predict the bank will cut rates to at least 3.75 percent by the end of June, assuming that record inflation has started to ease by then.

Most expect Trichet to announce that the ECB’s staff have revised down December’s projections of 2.0 percent growth in 2008 and 2.1 percent in 2009, and that they have raised this year’s inflation forecast from the current 2.5 percent.

Annual euro zone inflation was 3.2 percent in January and February, the highest level since records began in 1997 and well above the ECB’s target of just below 2 percent.

Apart from leaving its main refinancing rate at 4 percent, the ECB also said its deposit rate would remain at 3.0 percent and its marginal lending rate at 5.0 percent.