Rate cuts in the eurozone were ruled out for the foreseeable future yesterday by Jean-Claude Trichet, the President of the European Central Bank (ECB).

Mr Trichet revealed that some members of the ECB’s Governing Council had even argued for rates to rise at yesterday’s monthly meeting.

Their calls came in spite of the financial crisis that has caused analysts to scale back their growth forecasts for all major economies and caused many to predict that the ECB would soon move to loosen policy in line with the United States Federal Reserve and the Bank of England.

The ECB eventually voted to keep rates on hold at 4 per cent. Mr Trichet said that a rate cut had not been discussed and emphasised instead that the eurozone had to avoid the long-term “second-round” effects of higher oil prices. Inflation in the eurozone has climbed to 3 per cent, a six-year high, and well above the ECB’s target of 2 per cent. Staff at the central bank raised their outlook for next year’s inflation, saying they expected it to be about 2.5 per cent and then fall back below target in 2009.

In contrast to the ECB’s hawkish stance, the Organisation for Economic Cooperation and Development (OECD), said that the eurozone should steer clear of higher interest rates. The increase in inflation was likely to prove temporary, it advised.

In its half-yearly Economic Outlook the OECD cut its forecast for GDP growth in the 13-member bloc next year to 1.9 per cent, from 2.3 per cent, saying growth would improve slightly in 2009. It said that the expected lull next year would be caused by slower consumption and a weaker housing market, although business investment and export “should remain a pillar of activity”.

The OECD also said that the rise in the eurowas not as dramatic as it had often been portrayed.

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