Jean-Claude Trichet, President, European Central Bank, Frankfurt captured during the session 'Redesigning Financial Regulation' of the Annual Meeting 2010 of the World Economic Forum in Davos, Switzerland, January 30, 2010. © World Economic Forum swiss-image.ch/Photo by Sebastian Derungs

The European Central Bank (ECB) and Bank of England are expected to leave interest rates at historic lows when their respective rate setting committees meet in Frankfurt and London today. The ECB's benchmark rate is currently at 1% and the Bank of England's rate is at 0.5%  --  the lowest since 1694.

In the Eurozone, economic recovery remains fragile. On Wednesday, it was reported by Eurostat, the EU's statistics office, that retail sales were flat in December, while the Markit Eurozone Composite Output Index - - reflecting a poll of a panel of around 4,500 manufacturing and services firms, by Markit Economics - - posted 53.7 in January, down slightly from December’s 26-month high of 54.2. The headline index has signalled an increase in private sector activity in each of the past six months but Markit said the recovery remained more firmly rooted in the manufacturing sector at the start of 2010. Growth of manufacturing production increased for the sixth successive month and at the fastest pace for almost two-and-a-half years. Although service sector business activity continued to expand, growth was more moderate than that signalled for manufacturing and weaker than in the previous month.

The economy of the 16 member country Eurozone will grow 0.8% this year and 1.2% in 2011, according to the ECB’s December staff forecasts. It shrank 4% last year, according to European Commission estimates.

ECB President Trichet said last month that emergency liquidity programs will be“phased out in a timely and gradual fashion.”  He had announced in December more restrictive collateral terms for its final tender of 12-month loans and said it will discontinue its six-month loans after March.

The ECB is continuing to lend to banks rather than having them bid for the cash, in an effort to get credit flowing through the economy again.

However, there is likely to be a return to an auction procedure in some of its refinancing operations, which may be announced after the March meeting of the governing council.

“The ECB is on track for a complete normalization of its lending operations by the third quarter,”said Laurent Bilke, a former ECB economist now at Nomura International Plc in London, to Bloomberg News. “That’s a prerequisite and will pave the way for the first rate hike” in November, he said.

The euro has fallen 8% against the US dollar since late November.

On Wednesday, the European Commission announced the approval of Greece's deficit reduction plan and closer monitoring of implementation.

In January, when Trichet was asked if Greece was likely to leave the Eurozone, he commented: "I don't comment on absurd speculation."

The ECB will announce its rate decision at 12:45 p.m. Dublin time and Trichet will holds a press conference 45 minutes later. The Bank of England is expected to pause its bond-purchase program and will announce its decision on rates at noon in London.