The ECB warned employers not to allow wages to spiral

High oil prices and an increase in the cost of food have buoyed inflation in the eurozone at a time when economic growth is seen slowing.

The ECB has said inflation remains a problem, noting that December's annual rate of 3.1% was above its 2% target.

It is not alone in having to balance growth and inflation problems. The Bank of England also left its main interest rate unchanged on Thursday.

The Bank left its main UK borrowing rate at 5.5%, despite calls from retailers and many business leaders for a cut to boost economic growth.

One analyst predicted that it would be a long wait for a change in eurozone rates.

"After the ECB raised interest rates to a roughly neutral 4.0% in June, the strong euro and the lingering turmoil in money and credit markets will likely keep the central bank on hold until September 2008," said Holger Schmieding at Bank of America.

Wage warning

There were strong comments from ECB President Jean-Claude Trichet at a news conference to explain the rate decision.

He warned eurozone employers not to allow wages to spiral.

"We call upon them to behave properly," he said.

"We will not tolerate that you will engage in a spiralling (of inflation)."

Mr Trichet appeared to be warning that employers need to control wages or there would be an immediate rise in interest rates.

"I think that the ECB feels that inflation expectations have not picked up sufficiently to warrant a rate hike today and they're just sending out the message to make sure the expectations don't pick up," said Mark Miller at Bank of Scotland Treasury Services.