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Thursday, 7 February, 2002, 12:50 GMT
Eurozone interest rates unchanged
Euro trader
Traders had tipped the ECB to leave rates on hold
The European Central Bank (ECB) has left its key interest rate unchanged at 3.25%.

The decision had been widely predicted by financial market professionals.

The outgoing ECB president, Wim Duisenberg, who earlier on Thursday said he will stand down this year, predicted that the eurozone economies is set for a gradual recovery this year.

"Monetary developments thus far do not indicate risks to price stability," Mr Duisenberg said.

"This assessment of low inflationary risks is also supported by the declining trend in the growth rate of loans to the private sector," he added.

Analysts are increasingly predicting that the next move by the ECB will be to raise the rate, rather than to cut it further.

The rate is the lowest in the eurozone since February 2000.

Beating recession

Last year, the ECB reduced rates four times, the last time in November when it cut by half a percentage point from 3.75%.

In the US, which has been in recession since last spring, the Federal Reserve cut interest rates 11 times last year.

The Bank of England cut rates seven times during 2001.

The ECB has not cut rates as often as its counterparts because inflation in the eurozone has been exceeding the 2% target.

Falling inflation

Looking ahead, analysts predict that eurozone interest rates will fall in 2002.

Falling inflation makes rate cuts highly unlikely since lower interest rates could push inflation higher.

"We also continue to expect no medium-term upward pressures on inflation," Mr Duisenberg said.

But if the world economy fails to recover as fast as many analysts now predict, there is still a slim chance of another cut in interest rates this spring, said one observer.

See also:

07 Feb 02 | Business
Duisenberg to quit ECB
03 Jan 02 | Business
The euro's next challenges
06 Dec 01 | Business
ECB holds rates steady
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