As it was widely expected the European Central Bank (ECB) left interest rates unchanged at 4.25 per cent. ECB President Jean-Claude Trichet presented a neutral stance on interest rates at the press conference, with no particular bias to either direction.

Although Mr Trichet emphasised over and over again that the ECB's main objective is to maintain price stability in the medium to long term, he also expressed confidence that inflation would come back below two per cent, that is the ECB's target, in the course of 2010.

In the meantime the latest staff forecasts (that are not actually issued by the ECB itself) revised inflation for 2008 to 3.5 per cent from 3.4 per cent and to 2.6 per cent in 2009 from 2.4 per cent. Any over concerns over the inflation upward revision were neutralised by downward revisions to growth, to 1.4 per cent from 1.8 per cent in 2008 and 1.2 per cent in 2009 from 1.5 per cent.

Meanwhile, retail sales published earlier last week confirmed a fairly bleak economic outlook for the eurozone, as retail sales in the euro-area fell by 0.4 per cent month on month, while Gross Domestic Product was confirmed to have contracted by 0.2 per cent quarter on quarter in the second quarter of this year, down from a 0.7 per cent gain in the first quarter.

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