The European Central Bank (ECB) and the Bank of England are expected to mark the first anniversary of the global credit crisis by leaving rates on hold Thursday, immobilized by the twin economic threats of surging inflation and slumping growth, dpa reported.
The announcements by Europe's two leading central banks that the cost of money in the 15-member eurozone and Britain would be unchanged follows Tuesday's move by the US Federal Reserve to keep borrowing costs on hold at 2 per cent.
But then all three central banks are facing the same dilemma as they try to ward off a pickup in inflation while at the same time shoring up confidence in national economies grappling with the fallout from the credit crunch, sharp rises in the cost of living and talk of recession.
A fall in energy costs may have helped to ease some of the pressure on world central bankers with investors also cheered by the slump in oil prices and as consequence setting about driving up share prices on key bourses.
But this week's drop in oil prices to below 120 dollars a barrel for the first time in three months follows growing concern that a slowing world economy was likely to undercut global energy demand.
This in turn has also helped to underscore the delicate balancing act currently facing central bankers.
More to the point, the wrong signal from monetary authorities in the current brittle economic environment could set off another round of share market volatility similar to that which emerged a year ago as the US subprime mortgage market crisis took hold.
This week's round of leading central bank meetings are also being held against the backdrop of the latest European company reporting season which has been marked by patchy results from key industrial sectors and less-than-encouraging earnings from banks still struggling with subprime writedowns.
The result will be that comments made by central bankers are likely to be closely picked over by analysts for some hints as to how they see both monetary policy and the world economy developing in the run-up to the end of the year.
In particular, this is the case with ECB chief Jean-Claude Trichet, who is likely to indicate at his regular press conference Thursday that the Frankfurt-based bank is in no rush to alter monetary policy.
"The ECB is likely to leave interest rates unchanged for a long period," said Joerg Kraemer, chief economist at Germany's Commerzbank.
Up until recently a solid performance by the eurozone economy allowed the ECB to sound more hawkish on the heightened inflation risks. July consumer prices in the currency bloc climbed to a record 4.1 per cent, which is more than double the ECB's target of "close to, but just below 2 per cent."
Inflation in Britain is expected to nudge forward to 4 per cent by the end of the year after shooting up to 3.8 per cent in June from 3.3 per cent in May.
But like the Fed and the ECB, the Bank of England is widely expected to sit tight this week and to leave rates on hold at 5 per cent as it sizes up the state of the British economy, which has taken a hammering as a result of the credit crunch and slumping global growth.
At its meeting four weeks ago the ECB fired off a warning shot about the growing threat of resurgent inflation by delivering its first rate hike in more than a year, lifting borrowing costs to 4.25 per cent.
Some analysts believe that the Frankfurt-based bank might follow up the 25-basis-points increase with another monetary tightening later in the year.
But evidence that the economic gloom across Europe is deepening is likely to make it more difficult for the powerful anti-inflationary hawks on the ECB's 21-head rate-setting council to mount a case for a further increase in borrowing costs in the coming months.
To be sure, the economic picture facing the eurozone has continued to darken on the back of a grim new roll call of economic numbers.
While industrial production in the currency bloc chalked up its biggest fall in nearly 16 years in May, retail sales reported the biggest fall in 13 years in June.
At the same time, eurozone economic confidence recorded its biggest fall since the 9/11 terrorist attacks on the United States in 2001, according to a closely watched European Commission index.