Thursday the European Central bank estimated the reduction in the euro zone economic growth and still aims to raise the interest rate.

Eurozone growth in the second half of 2004 had been "disappointing", the ECB President Jean-Claude Trichet said on a conference.

Poor growth at the end of 2004 forced the ECB to lower its GDP forecasts as it held interest rates at a historic low of 2 percent for the 21st month in a row.

ECB President Jean-Claude Trichet said that historically low interest rates were making a contribution to the recovery.

"The strengthening of domestic demand and in particular consumption may point to the recovery of economic activity and in particular the euro area gaining some momentum," he said.

"Everybody knows that at a time, we will have to increase (interest) rates. That is anticipated by all observers," he added.

"Obviously, the ECB still has a de facto tightening bias, but is in no hurry to raise rates. In Trichet’s words, ’We wait for facts and figures’," said Joerg Kraemer, economist at HVB in Munich.

The ECB cut its 2005 growth forecasts to between 1.2 and 2.0 % from 1.4-2.4 % expected in December, and trimmed next year’s GDP forecast to a range of 1.6-2.6 percent, from 1.7-2.7 percent.

Trichet said that “high oil prices and global imbalances remained a risk to growth”, and repeated that “sharp moves in currency markets were unwelcome and undesirable for growth.”