The European Central Bank and the Bank of England left interest rates unchanged as widely expected today.

The Governing Council of the ECB decided that the minimum bid rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 4.25%, 5.25% and 3.25% respectively.

Earlier, the Bank of England put its rates on hold at 5.0 percent for a fifth month running, but expectations are rising that recession worries could prompt a cut before the end the year.

With inflation more than double the central bank's 2 percent target, all 67 economists polled by Reuters had expected the Monetary Policy Committee to keep rates unchanged.

Nevertheless, the speed and scale of Britain's economic slowdown means interest rates could come down quite rapidly once inflation has peaked. Money markets are pricing in a good chance of three quarter-percentage point cuts by this time next year.

Economic news in recent weeks has been unremittingly grim. House prices are tumbling, unemployment is rising and consumer confidence is at rock-bottom.

The economy failed to grow in the second quarter for the first time since the recession of the early 1990s and activity surveys show most parts of the economy are now contracting.