Brussels, 06/02/2003 (Agence Europe) - During Thursday's meeting of its Governing Council, the European Central Bank (ECB) decided to keep its key rates unchanged. The minimum bid rate applied to the main refinancing operations stays at 2.75%. The marginal lending facility and the deposit facility remain at 3.75% and 1.75% respectively.
During a press conference, ECB President Wim Duisenberg explained that, according to the Governing Council, "overall, the current monetary policy stance remains appropriate to preserve a favourable outlook for price stability in the medium term". The low level of these rates should help to offset a negative impact on economic activity stemming from the "high degree of worldwide uncertainty" and should also "contribute to a sustainable economic recovery in the course of 2003", he remarked. He went on to add: "For the time being, we still assume that the high degree of uncertainty will decline in the course of this year. However, at this juncture it is very difficult, if not impossible, to form a conclusive judgement on the impact of geopolitical developments on the world economy in general, and the euro area in particular".
Economic activity in the euro area remained subdued around the turn of the year, Mr Duisenberg recalled, saying that the recent indications confirm that growth of GDP should gradually increase from the second half of 2003 and reach a level close to its potential by the end of the year. The ECB President did not express concern about the rise in the euro as, in his view, the competitiveness of Europe has not been brought into question. "Whereas the appreciation of the euro over recent months may contribute to dampening export growth to some extent, the price competitiveness of euro area companies remains favourable in a medium-term perspective and export growth should benefit from the expected recovery of the world economy", he noted.
He set out the factors that contribute to the general climate of uncertainty: - "investors remain risk averse against the background of ongoing geopolitical tension"; - "further turbulence in the oil markets could have a negative impact on economic activity throughout the world and, thereby, also on euro area employment", and consumer confidence is affected by such factors. Mr Duisenberg repeated that he expected inflation would go below the 2% mark in the course of 2003.
In answer to questions put to him by journalists, Mr Duisenberg specified that "the obstacles to a fall in rates are the strong uncertainties prevailing on the development of oil prices and the geopolitical situation". By cutting the rates now, this would "only be a drop of water in the sea of uncertainty". He also pointed out that the Governing Council hoped to complete, within one or two months, reassessment of the ECB's monetary strategy (monetary mass on one hand and economic activity on the other). The ECB will publish the conclusions "as soon as it is finished". To the question of knowing whether the euro was increasingly a "safe currency", he replied that it seemed to him many investors in the world, including the central banks, "consider the euro as an attractive investment compared to other currencies".