The ECB is responsible for monetary policy in the eurozone

The European Central Bank (ECB) revealed its decision following a governing council meeting on Thursday.

Economists had expected the ECB to keep rates frozen this month but are expecting a cut later this year.

There had been calls from some in the German business community to lower rates now in order to stimulate growth.

However, a positive reading of manufacturing in the eurozone, and improving French consumer confidence released on Thursday dampened rate cut speculation.

The rate has been at 2% since June 2003. But some analysts expect a rate cut to take place by this June.

ECB President Jean-Claude Trichet said the bank's key interest rate remained "in line with the maintenance of price stability" in the eurozone, despite some mixed recent economic data .

Short-term growth

Mr Trichet said: "We have not changed our assessment that the current stance of monetary policy remains in line with the maintenance of price stability over the medium term."

The conditions for a rate cut are as good as they're ever going to get, so if we don't have a rate cut now, when will we? Jon Lee, Barclays Capital

He said the bombings in Madrid did not appear to have impacted on confidence.

But he added: "Recently released data on production and demand as well as confidence indicators have been mixed, implying some short-term uncertainty.

"We will continue to monitor the situation closely. On balance, there is currently no evidence challenging the assessment of continued, though modest, real GDP growth in the euro-area over the short term."

The conditions remain in place for the recovery to continue during the year, he said.

'Behind the curve'

After the ECB decision, Jon Lee, international rate strategist at Barclays Capital in London, said: "The conditions for a rate cut are as good as they're ever going to get, so if we don't have a rate cut now, when will we?

"The problem is that we also have inflation likely to rise from here. The latest readings for eurozone annual inflation this week were 1.6% and it won't fall from here.

"So, if anything, the ECB is still behind the curve and may now start to consider conditions of uphill prices."

Following the announcement the euro reached $1.2370, having stood at $1.2338 just ahead of the ECB rate announcement.

The ECB's decision comes ahead of a key US jobs report due on Friday.

The US jobs figure has come to be viewed by many in the financial markets as the main guide of whether global economic recovery is sustainable.