While the world waits for Fed chairman Mr Alan Greenspan to cut US interest rates today, speculation in the financial markets is turning towards Frankfurt, where the European Central Bank's governing council meets tomorrow.

The second US interest rate cut within a month has been so clearly signalled that a failure to act would plunge the markets into turmoil. But analysts are less certain as to how to read the mood in Frankfurt's Eurotower.

Nobody is predicting a move on interest rates tomorrow, not least because the Bundesbank president, Mr Ernst Welteke, declared in Davos this week that rates were "on hold". In fact, few analysts expect the ECB to cut rates before April and some predict that the central bankers will wait until the summer before they make their move.

Mr Wim Duisenberg and his colleagues continue to warn of the danger of inflation and they insist that, despite the downturn in the US, economic growth in the euro zone will remain robust into 2002, albeit a little slower than last year. The ECB acknowledges that high oil prices and euro weakness are the main causes of euro-zone inflation, but they are worried that the current wage round could lead to pay increases that will fuel inflation further.

The central bankers also fear that, with elections due next year in some EU states, including France and Germany, politicians may be tempted to intro duce expansionary economic measures.

In common with many leading European politicians, the ECB is confident that Europe can remain insulated from the US downturn, which it expects to take the form of a "soft landing" rather than an extended recession. Unfortunately, this view is not shared by international bankers, an overwhelming majority of whom is convinced that euro-zone growth is slowing.

A survey of chief economists from international banks, published in the Financial Times Deutschland this week, found that 24 out of 30 believed the ECB's interest rate of 4.75 per cent was no longer appropriate. The economists expect eurozone growth to average just 2.7 per cent this year, half a per cent less than they were suggesting four months ago. Although inflation in the euro zone is running at 2.6 per cent, all but one economist polled predicted that price rises would remain below the ECB's target of 2 per cent this year.

Although the economists believe the ECB should cut rates now, most expect the bank to wait until April. And despite the stimulus to US confidence from today's expected action by the Fed, most analysts remain convinced that the euro will return to parity with the dollar within months.

Participants at the world Economic Forum in Davos this week were struck by the chauvinistic tone of some European representatives who predicted that, after years of strong US growth, Europe's hour had come at last. According to the more confident Europeans, the euro zone has effectively decoupled from the US economy and will thus remain immune to the effects of a downturn.

If Europe does avoid catching a cold from the US economic sneeze, it will in part be due to a European public that has resisted calls to sink most of its savings into the stock market.

Now the same economic gurus who preached the virtues of unbridled, free markets are positioning themselves to take the credit for the strength of Europe's economy. Despite the ECB's recent utterances downplaying expectations of an imminent interest rate cut, Mr Eckard Schulte of Dresdner Kleinwort Wasser stein believes the central bankers' tone has moderated in recent weeks.

"The markets should not place too much emphasis on the ECB's efforts to stress their independence from the Fed and should instead take note of the admission that inflation risks are diminishing and that growth is slowing," he said.

Mr Schulte expects the ECB will cut rates as early as March 1st.