The BBC's Jonathan Charles: The ECB may have to cut rates in the new year to boost consumer confidence

The president of the ECB, Wim Duisenberg, said the bank wanted to maintain this rate for the "foreseeable future". He said interest rates in the eurozone were already "very low by historical standards".

ECB president Wim Duisenberg says the euro is launched in "optimal" economic conditions

Early in December the central banks joining monetary union had already cut their interest rates to 3%, in a concerted move which surprised the financial markets. Only Italy had kept its rates at a slightly higher level. From 1 January onwards the ECB will be in charge of setting the interest rates for the whole eurozone.

In the UK interest rates are more than twice that high, currently at 6.25% and on Monday the International Monetary Fund had said that there was still "scope" for rate cuts in the UK. However, the ECB's decision to hold rates steady at 3% will reduce the pressure for more decisive rate cuts.

Christian Noyer, the ECB's deputy president, said the bank's council did not expect the euro to trounce other currencies: "The ECB wants a euro that will be solid and stable, but we also want the dollar to be a solid and stable currency."

Phasing in bank rates

The new rate will be applied as the "initial tender rate" for the bank's weekly refinancing operations. This is the rate at which the ECB will lend money to banks in the eurozone and will determine overall interest rate levels in the eleven countries joining monetary union on 1 January 1999.

As a transitory measure, the deposit rate will be initially set at 2.75% and the marginal lending rate at 3.25%. From 21 January onwards the rates for these lending facilities will be set at 2% and 4.5% respectively. Wim Duisenberg, the ECB's president, said the phasing in of interest rates was designed to smooth the launch of the new euro money market, as nobody could "foresee whether the euro area money market will indeed work in a fully integrated way immediately from the very first day."

ECB board: Last minute preparations

It was the European Central Bank's last council meeting before the launch of the new single currency, the euro.

The bank said it would publish its first monthly report on 19 January and its first annual report on 15 April.

As the prime monetary authority in the eurozone, the ECB is anxious after a year of global market turbulence to make sure any volatility over New Year does not give the euro a difficult birth.

Euro valuation critical

Late on New Year's Eve, the ECB will set the final conversion rates of the euro with other currencies.

Banks and other companies in the eurozone and all over the world will take these rates and convert eurozone-related assets and cash holdings to their initial euro valuation.

The big risk is that a last-minute wobble in the international currency markets might result in an adverse level for euro, Stephen Bell, chief UK economist at Deutsche Bank, told BBC Radio 4's Today programme.

This in turn would distort the valuations made by banks and businesses affecting their balance sheets and also impact on the euro's value as it floats against other currencies from the start of business again on 4 January.

There is not much the ECB can do about this but it can take measures to limit the fallout from turbulent markets during the changeover from this or any other reason.