In a somewhat surprising move, the European Central Bank (ECB) has opted to hold its benchmark interest rate at 2%. The ECB has found itself in the precarious position of trying to reconcile the risks of inflation with prospects for growth in conducting its monetary policy. Due in part to rising fuel prices, Euro-area inflation has reached a 1-year high, at 2.5%. Meanwhile, growth prospects are also improving as domestic consumption and exports pick up. While a few prominent economists have called on the ECB to lower interest rates, the ECB rarely bows to external pressure. The Financial Times reports:

Although Jean-Claude Trichet was expected to take a more hawkish tone in the afternoon press conference, highlighting inflationary pressures, the threat of weakening growth remains and few analysts expect any upward move for rates until well into next year.

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