Euro zone interest rates will likely be left unchanged when European Central Bank governors mull monetary policy tomorrow against a backdrop of record inflation and slowing but still resilient growth.
A poll of 30 economists found all expected the ECB to keep its main refinancing rate at 4%, with most not anticipating any reduction before the third quarter of 2008.
Benchmark rates in the euro zone have remained unchanged since June but the US Federal Reserve has slashed its key rate by three percentage points to 2.25% since September in a battle against possible recession. The result has been to push the euro to successive record levels to above 1$.59 at one stage, crimping euro zone exports.
Analysts said that the ECB will not and can not budge, because it faces the twin issues of strong inflation and weaker growth.
The ECB's official mandate is to maintain price stability for the euro zone's 320 million people and it is battling sharp rises in the cost of energy and food that pushed overall inflation to 3.5% in March, the highest level since the euro was launched in 1999.
At the same time, it has to be mindful that growth is slowing and under pressure although the euro zone as a whole and Germany, its biggest economy, has shown surprising resilience to the recent financial market turmoil.
While keeping monetary policy unchanged, the ECB has been trying to ease the banks' credit crunch by making massive amounts of liquidity available so as to keep money market rates as close as possible to its benchmark level.
In Britain meanwhile, the Bank of England has entered a cycle of gradually lowering its main lending rate and is tipped to cut it by another quarter point to 5% tomorrow in what economists said was a close call.
The Bank of England, like the Fed, wants to ensure economic activity does not stall while ECB president Jean-Claude Trichet has also acknowledged 'unusually high' uncertainty about the prospects for euro zone economic growth.
