The European Central Bank kept its benchmark interest rate unchanged at 4 per cent this afternoon, as expected, as it weighs a worsening inflation outlook against continued uncertainty about economic growth.
Euro zone interest rates have now been on hold for 12 months after credit market tensions derailed a tightening cycle which doubled credit costs between late 2005 and mid-2007.
All 82 economists in a Reuters poll last week had expected no change to interest rates this month, although most expect a cut later this year. This is in contrast to financial markets, which are betting on a 0.25 percentage point rise.
The ECB faces rising inflation pressures in the 15-nation euro zone, where food and energy costs pushed annual inflation back up to 3.6 per cent in May, the same level as in March and the fastest pace in the ECB's history.
ECB President Jean-Claude Trichet will present the ECB's latest economic assessment at a news conference at 1.30pm in Frankfurt.
The ECB left its marginal lending rate, at which banks can get emergency overnight loans, at 5 per cent and its deposit rate at 3 per cent.