The European Central Bank yesterday disappointed investors eager for more action to counter the rising threat of deflation in the region, holding interest rates steady and offering few hints that it could soon loosen monetary policy.

The euro jumped to its highest in two weeks against the dollar after markets’ hopes of imminent action were dashed by the governing council’s decision to keep its benchmark main refinancing rate at 0.25 per cent and ECB president Mario Draghi’s insistence that there remained little threat of deflation.

An unexpected dip in inflation to 0.7 per cent in January had bolstered calls for more easing ahead of the meeting. But those calls were ignored by the bloc’s 24 rate-setters, none of whom tabled a rate cut or measures to add liquidity to counter the recent rise in money market rates.