Brussels, 11/04/2001 (Agence Europe) - The Governing Council of the European Central Bank (ECB) decided on Wednesday not to change its main interest rate in the face of pressure to cut rates given the slowdown of the European economy. The benchmark interest rate for main refinancing operations will remain at 4.75%, and the marginal lending facility and deposit facility will remain unchanged at 5.75% and 3.75% respectively. The last time these rates changed was in October 2000 although the slowdown in the world economy since then has led the US Federal Reserve and the Bank of Japan to cut interest rates at the beginning of the year.
The ECB President, Wim Duisenberg, justified this decision by saying that inflationary risks had diminished but had not disappeared. He explained to the press that inflationary risks may have reduced over the last three months but they had not disappeared and he repeated that he intended to pursue his strict "wait and see" monetary policy until the inflation rate in the Euro-zone fell below 2%. He said that while he heard the advice of those telling him to cut rates, he did not follow it, although he did signal that he expected Euro-zone inflation to fall below 2% in the second half of 2001. He recalled that the actual exchange rate itself was not a target of ECB monetary policy.
Mr Duisenberg refuses to comment on rumours that he might resign
To questions about when he was likely to resign, the ECB President Mr Duisenberg simply repeated that he refused to comment on the issue, as he had already made clear on 31 December 1998, the day before the Euro was launched. He referred to a statement he made in May 1998 whereby he signalled that he did not expect to finish his term of office, but also referred to an interview in which he said that he would not resign. He added that he did not expect rumours of his resignation to have any impact on the Euro itself.
Mr Duisenberg rejected the idea of having fewer ECB Governing Council meetings since the current frequency only unsettled the markets. He said that the Council must continue to meet in order to act as a team.