The European Central Bank today held its key interest rates steady, as expected , leaving eurozone borrowing costs at historic lows amid new signs the 17-nation single currency area is in recession.

The ECB's policy-setting governing council voted to leave the rate for its main refinancing operations unchanged at 1.0 percent at its regular monthly meeting here, brought forward by one day owing to the Easter holidays.

No rate changes had been expected this week after the recent rate cuts and the unprecedented amounts of liquidity pumped into the banking system to avert a possible credit crunch in the eurozone economy.

Analysts and central bank watchers said that the bank, the guardian of the euro, would want to see how those measures have played out before taking further action.

But new evidence that the eurozone is in recession came on Wednesday with the release of the composite Purchasing Managers Index (PMI) which hit a three-month low in March.

Battling the relentless debt crisis, the eurozone took a first step towards recession when its economy shrank by 0.3 percent in the fourth quarter of 2011. A recession is defined as two consecutive months of economic contraction.

The PMI, a survey of 4,500 manufacturing and services firms, showed that activity in the services sector dropped for the second month running in March, while manufacturing output shrank for the first time in three months.

The ECB has, since December, thrown open its liquidity floodgates twice, flooding the banking system with cheap funds in order to avert a dangerous credit squeeze.

Banks have borrowed more than 1.0 trillion euros ($1.3 trillion) from the ECB at exceptionally low interest rates.

The ECB hopes the banks will lend the money to households and businesses and also use it to bring down government borrowing costs.

The measure does indeed seem to be working, even if analysts agree it will not be enough on its own to solve the eurozone's crippling debt crisis and will merely buy time.

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