The European Central Bank (ECB) as expected left its main interest rate at 2%. The growth estimates for the next year were trimmed to 1.9% from 2.3% and the inflation target was raised from 1.8% to 2%. Most economists expected the ECB to pause with rate increases until 2005 in order to allow room for growth in the European economies with subsequent efforts to stem the inflation.

Manufacturing in eurozone grew at the slowest pace in more than a year and Germany's unemployment rate rose to its highest since 1998 on 50% surge in oil prices and 11% increase in the euro against the dollar.

 

The ECB president Jean-Claude Trichet, said today that he will not comment on foreign exchange intervention. Trichet has called the euro’s steep climb "brutal" and "unwelcome." The euro hit a new record level today at $1.3385.

 

Some economists expect the market to probe into Trichet’s intentions to see whether he will take action to support his words by selling bank reserves to buy dollars to push the dollar value up, probably joining efforts with the Bank of Japan.