The European Central Bank kept interest rates steady as expected on Thursday, defying calls from top European politicians for lower borrowing costs to offset damage caused by the strong euro. But markets are now on the alert for any sign that the ECB is leaning towards cheaper credit in the months ahead if economic growth falters. The ECB said its Governing Council had decided to keep the euro zone's key rate at 2.00 percent at its monthly monetary policy meeting. ECB President Jean-Claude Trichet will explain that decision at a news conference starting at 1330 GMT. In leaving rates at historic lows for the ninth month in a row, the ECB ignored calls from German Chancellor Gerhard Schroeder and French Prime Minister Jean-Pierre Raffarin for still lower rates to counter the strong euro, which vaulted above $1.29 last month, a record high.
The euro's rise helped annual inflation slow more sharply than expected in February to 1.6 percent from 1.9 percent in January and was also blamed for a setback in key confidence indicators in the same month. The euro has retreated sharply in the past week, trading as low as $1.2151 on Thursday ahead of the ECB's rate decision. Financial markets are expected to scour Trichet's statement for any hint that slowing inflation and the uncertain path of recovery create scope for monetary easing ahead.///