The European Central Bank (ECB) made a hefty half-point cut at its meeting in December, and had been widely expected to leave rates alone this month.

The Bank of England's Eddie George delivered a surprise rate cut

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But a surprise cut in the UK earlier in the day, combined with a tidal wave of gloomy economic news from around Europe, had encouraged some to look for another cut from Frankfurt.

But while the German economy - by far the biggest in the eurozone - is showing increasing signs of slowing, the ECB insists that its only job is to fight inflation.

The ECB is believed likely to cut interest rates further this year, but may wait to see the effects of any possible war against Iraq before acting.

Pluses and minuses

The outlook for the eurozone economy is highly uncertain.

On the one hand, a sharp rise in the euro against the dollar over the past few weeks seems to imply that a rate cut could be desirable.

Germany is also flirting with recession, as unemployment hits five-year highs and retail sales fall sharply.

News out of France and other large eurozone economies has also been less cheering than many had hoped.

On the other hand, the high price of oil could have an acute effect on eurozone inflation - and a war in the Middle East is likely to prolong that threat.

Eurozone inflation, at 2.3%, is still above the ECB's target, despite repeated predictions that it is about to fall into line.