The European Central Bank is expected to leave interest rates unchanged on Thursday when its governors meet against a backdrop of rising inflation and slowing growth.
A survey of 30 economists by AFP/Thomson Financial News found that all expected the bank to leave its benchmark interest rate unchanged at 4%.
The meeting at the bank's headquarters in Frankfurt will see governors from the euro zone's newest members, the Mediterranean islands of Cyprus and Malta, take part fully for the first time.
They have observed meetings of the now 15-member group in the past, but Thursday will see them actively participate for the first time since they joined the euro zone on January 1, an ECB spokesperson explained.
The ECB is set to hold its rates steady despite moves by other central banks to lower the cost of borrowing because of the drag on activity caused by a US housing crisis and banking sector turmoil.
The US Federal Reserve is widely expected to cut again at its next meeting on January 30 after cutting its benchmark rates by one percentage point at the end of 2007 to help stimulate the slowing US economy.
In Britain, the Bank of England cut its main lending rate last month to 5.5% and might lower it again at its own meeting on Thursday, according to some analysts.
ECB president Jean-Claude Trichet has stressed the bank is concerned about inflation sparked by spikes in food and fuel prices that could underpin calls for higher wages, creating a persistent 'second-round' effect. 'Food is a very big problem' stoking inflation, Trichet said yesterday in Switzerland following a meeting of the G10 group of central bankers.
The ECB has an inflation target of just below 2%, but saw the rate hit 3.1% in December according to provisional data, a level not seen since May 2001.
Trichet has warned that higher wages and industrial prices in reaction to spikes in the costs of energy and food would result in longer-term inflation, threatening economic growth and jobs.
The ECB must also contend with tight conditions on money and credit markets, the euro's strength against other major currencies, especially the dollar, and signs the US economy could be heading into recession.
