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The ECB has decided to keep the base interest rate unchanged at 1% saying information that has become available since mid-January broadly confirms our previous assessments.

Following successive cuts in November and December ECB President Mario Draghi kept rates unchanged last month and today said that inflation is likely to stay above 2% for several months before declining to below 2%.

Euro area annual inflation was 2.7% in January 2012, according to Eurostat’s flash estimate, unchanged from December and the same as the average inflation rate for 2011,

Mr Draghi also reiterated previous statements that the outlook for the euro zone remains subject to high uncertainty and substantial downside risks in particular he said the potential of euro area debt market tensions spilling over into the real economy.

ECB economic analysis showed real GDP quarter-on-quarter growth in the final quarter of 2011 is likely to have been very weak and Mr Draghi suggested that interest rates will be required to remain low to allow for tentative stabilisation of the euro area economy.