Few expected an interest rate change

The European Central Bank has left interest rates on hold in the eurozone at 2.5%, as predicted by most analysts.

Rates were left on hold despite deteriorating economic conditions in Germany, Europe's largest economy, and other countries.

The euro's 9% appreciation this year against the dollar, making exports more expensive, had been cited as another reason for a cut.

European Central Bank President Wim Duisenberg said the latest economic data "suggest that economic activity in the euro area has remained subdued so far this year".

"Looking ahead, we continue to expect a gradual strengthening of real GDP (gross domestic product) growth to start later in 2003 and to gather more pace in the course of next year."

Economists expect the ECB may lower rates when it meets in June.

Rates unchanged

The Bank of England also left rates unchanged on Thursday at 3.75% and the US Federal Reserve did likewise on Tuesday.

The Fed kept rates at a 42-year-low of 1.25% but left itself room to move by expressing concern about deflation in the US economy.

ECB President Wim Duisenberg will explain the reasoning behind it at news conference starting at 1230 GMT.

The ECB will on Thursday also announce the result of its five-month-long review of how well its monetary policy strategy has worked in setting interest rates for the 12-nation eurozone.