Ecb ‘shuts the door’ on rate cuts

The European Central Bank has ignored calls for a rate cut this month…

The ECB has kept interest rates unchanged at 4% as concerns about inflation outweigh evidence of slower economic growth. Inflation is being stoked by record food and energy costs, and analysts have warned that it may prove difficult to slow price growth in coming months.

However, critics have called for a rate cut, saying economic growth may stall. Earlier, the Bank of England cut its main interest rate by a quarter of a percentage point to 5%.

Good news for the Euro?

The ECB's decision to hold rates will buoy the euro, which is currently at a record high against the pound.  It has gained strength because of interest rate cuts in the US and UK, meaning that the dollar and the pound now offer lower returns.

Many analysts expect that there will be a long wait before eurozone rates Change.  The ECB was set to "keep the door shut for possible rate cuts in the foreseeable future", said Commerzbank economist Gavin Friend

ECB president Jean-Claude Trichet added: "Controlling inflation is the bank's priority".

In March, eurozone inflation hit 3.5% in March - well above the bank's 2% target.