The ECB is battling high inflation

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 to be slowing.

The ECB says price growth remains a concern. In January, inflation in the eurozone stood at a record 3.2%.

However, the central bank is expected to lower interest rates in the 15-nation eurozone later this year as growth slows further.

ECB President Jean-Claude Trichet said, "uncertainty about prospects for economic growth is unusually high."

But speaking at a press conference in Frankfurt he asserted that, "the fundamentals of the euro area economy remain sound".

Mr Trichet said that the ECB voted unanimously to keep rates on hold.

'Credibility at risk'

The ECB must target inflation which is at its highest level since the introduction of the European single currency in 1999. But eurozone retail sales as well as manufacturing output are falling.

By keeping rates on hold for the eighth consecutive month, the Bank's reputation is under pressure, according to Richard Snook from the Centre for Economics and Business Research.

"It's credibility is at risk because of signs of pressure on the financial sector, signs of slowing growth in the eurozone and the expansive action by other world central banks," Mr Snook said.