The ECB raised rates six times in the year to December 2006

Following the decision to freeze rates, ECB President Jean-Claude Trichet said "strong vigilance" was needed to avoid "risks to price stability".

Economists said that Mr Trichet's comments indicated that eurozone rates were likely to rise to 3.75% in March.

The decision to hold eurozone rates came after the Bank of England kept UK rates unchanged for another month.

March rise 'done deal'

The key eurozone economies have had a strong start to 2007.

EUROZONE RATE DECISION Benchmark rate kept at 3.5% Rates last raised in December Analysts now expect rate rise in March

Unemployment has fallen in France and Germany, with consumer confidence remaining strong, despite Germany's decision to increase value added tax (VAT) from 16% to 19%.

"Growth looks likely to remain above trend in the first half of the year," said Lena Komileva, an economist at Tullet Prebon.

However, wage pressures remain strong and there is particular concern about the latest round of pay negotiations with Germany's IG Metall union, analysts say.

Economists were looking carefully for a change in the language used by Mr Trichet at the news conference following the ECB's decision.

"Judging by the prepared statement, the ECB seems to have strengthened its hawkish language, warning more explicitly than it had done in the past about upside risks from wages and stating explicitly that they will watch the current wage negotiations carefully," said Sandra Petcov, an economist at Lehman Brothers.

"Together with the use of the phrase 'strong vigilance', a rate hike in March seems like a done deal."