Eurozone rates kept steady at 4%

The ECB has not changed interest rates since June 2007

The European Central Bank has kept interest rates for the 15-nation euro bloc steady at 4% amid increasing signs that economic growth is winding down.

The ECB signalled that it was not in a rush to cut rates, as it forecast inflation would stay "high for a protracted period of time".

Food and fuel prices have pushed inflation up to a record 3.6% in March, though this eased slightly in April.

Earlier, the UK's Bank of England left its main interest rate at 5%.

Speaking at a press conference in Athens, ECB governor Jean-Claude Trichet said: "Inflation rates have risen significantly since the autumn, owing mainly to increases in energy and food prices."

Inflation risks

Inflation has remained higher than 3% for the past six months - well above the ECB's desired target of 2%.

This has made the ECB reluctant to slash rates like its counterparts in the US and the UK, which analysts say have been more severely affected by the global credit problems.

"While the US economy has succumbed to stagnation and the UK economy is decelerating sharply, the eurozone has so far held up fairly well," said Holger Schmieding, Bank of America's chief European economist.

The US Federal Reserve has aggressively cut its interest rate from 5.25% to 2% since last September and the Bank of England has also been trimming UK rates, with some predictions that they could end the year at 4.25%.

Currency moves

The different approaches have sent the euro to record highs against the dollar and pound since the beginning of the year.

This has made eurozone exports more expensive and sparked criticism from some leading exporters, including plane maker Airbus.

However, once inflation stabilises, it is thought the ECB will begin to cut interest rates as the region's economy shows signs of cooling.

Last month, the European Commission downgraded its forecast for eurozone growth this year to 1.7%, from its earlier prediction of 1.8%.

Meanwhile, analysts have begun to suggest that the US economy may now have turned a corner.

The euro fell to a two-month low against the greenback in early Asian trade on Thursday, as confidence in the US currency returned, but rebounded after Mr Trichet's cautious comments.

In afternoon Europe trade, one euro was worth $1.5424 after earlier touching $1.5285.

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