Brussels, 02/05/2002 (Agence Europe) - In Frankfurt on Thursday, the European Central Bank (ECB) decided to leave the leading rates unchanged. The minimum bid rate on the main refinancing operations remains at 3.25% (level it reached following the 0.5% reduction on 8 November last). The interest rate on the marginal lending facility remains at 4.25% and that of the deposit facility at 2.25%. At his press conference, ECB President Wim Duisenberg explained that the Governing Council had concluded that "the prospects for price stability seems less favourable than they were towards the end of last year. At the same time, we recognised that the economic outlook remains subject to uncertainties and the price developments reflect the influence of specific temporary factors". "The recent sharp rise in oil prices and maybe a somewhat greater impact of the cash changeover, of the rounding of prices, has made us reconsider the outlook for prices", he added. According to certain analysts, the change in tone over inflation, (notably due to the risk of wage rises in Germany, of 2% in 2001 to 3.5% in 2002), combined with improved perspectives for growth in Europe, could mean that the ECB will increase its rates this summer. Furthermore, Duisenberg confirmed the tendency towards a resumption of GDP growth in the euro zone, which should be between 2 and 2.5% by the end of the year, and said that M3 growth stood at 7.5% from January to March 2002, against 7.8% from December 2001 to February 2002..
The absence of the word "appropriate", used by Mr. Duisenburg to qualify the rates and justify the monetary status quo, was very noticed. On this, the President of the ECB told journalists "we cannot repeat the same text each time. We certainly do consider that the current monetary policy is appropriate, but we recognise that the uncertainties in our evaluation have never been as strong". Mr. Duidenberg also answered questions on:
- weakness of the dollar: " What I am concerned about is the risk of new protectionist measures, as happened in the field of steel", he stressed, before declaring: "A continuing appreciation, or even leaving the euro where it is, will not help us in keeping inflation under control, and I do not believe that has had any impact on the real economy developments, on output or export capabilities in the euro zone".
- bank supervision: Mr. Duisenberg said that the Governing Council had "briefly" discussed this, as the EcoFin Council would be meeting on Tuesday to discuss a mandate on future co-operation of supervisory and central bank authorities (see EUROPE of 15 and 16 April, p.14). Mr. Duisenberg called on the Economy and Finance Ministers to "take account of the provisions that exist in the treaties" and ensure that "our bank supervisory committee may be incorporated into the new structure that will probably emerge".
Inflation and wage moderation: "I'm not as sure as before that the rate of inflation will fall below 2% by the end of the year, but it should be close to 2%", he acknowledged, before adding: "there is a greater risk of a rise in prices than a fall; we have witnessed disappointing developments in the field of the price of oil and the tertiary sector, which come on top of developments in wage setting". He also said that the outcome of wage negotiations could be a source of concern (in Germany).