Shadow of European Slowdown Looming

LONDON (MarketWatch) - Central bankers meet Thursday in London and Frankfurt, shadowed by growing evidence that U.S. economic woes are threatening prospects for growth in the United Kingdom and in the 15 European nations that make up the euro currency.

While recession fears have seen the Federal Reserve downplay inflation worries to slash interest rates, the Bank of England has eased at a cautious pace and the European Central Bank has held its fire.

In recent weeks, Bank of England Governor Mervyn King has signaled that slowdown worries slightly outweigh inflation concerns, analysts say, while ECB President Jean-Claude Trichet has remained steadfast in emphasizing price stability as the all-encompassing concern of continental monetary policymakers.

Markets now widely expect the Bank of England to trim its key lending rate by a quarter point to 5.25% Thursday, while the ECB is still expected to hold its key rate steady at 4%.

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