Brussels, 08/05/2003 (Agence Europe) - At its meeting on Thursday, the Governing Council of the European Central Bank (ECB) decided not to change its interest rates. The minimum bid rate on the main refinancing operations and the interests rates on the marginal lending facility and the deposit facility will remain unchanged at 2.50%, 3.50% and 1.50% respectively.
At a press conference, Wim Duisenberg said that the Governing Council confirmed that "its monetary policy decision will continue to be based on a comprehensive analysis of the risks to price stability" in the medium-term. "Recently published survey data and the latest information from conjunctural indicators suggest that economic activity in the euro area has remained subdued so far this year. Looking ahead, we continue to expect a gradual strengthening of real GDP growth to start later in 2003 and to gather more pace in the course of next year. Factors supporting this outlook are an expected recovery of global demand, the prospect of falling inflation benefitting real disposable income growth and the low level of interest rates." Duisenberg went on: "Since the end of the war in Iraq, financial market volatility has declined significantly, with a notable increase in stock prices". On prices, he said that inflation would probably fall below 2% in the medium term because of "an environment of moderate economic growth and the effects of the significantly higher exchange rate of the euro".
Duisenberg answered reporters' questions on the following topics:
Convention. "The Convention proposals should in no way mean a change in the mandate, in the independence, in the legal position, in the power to issue regulations of the Eurosystem, the ECB and the European System of Central Banks. And we will make these thoughts known to the Praesidium of the Convention".
Deflation. "We also read our newspapers and we see that here and there the word deflation re-emerges. We do not share this fear for the euro area on the whole."
Appreciation of the euro. "Twice in my introductory statement I talked about significant appreciation of the euro. One can say that the euro at the moment is about at the level which better reflects the fundamentals, and it is at about historical average levels, so there is not yet anything excessive about the levels; The speed with which it is going is almost equal to the speed with which it declined two years ago and that is a matter which we will closely watch in the near and far future."
Growth estimates. Asked whether the ECB's growth estimate was still 1% of GDP in 2003, the ECB President said: "That is still about the figure we are having but as you know we are in the process what we do twice a year of making forecasts, these forecasts will be concluded in June".
Inflation. "Whereas earlier this year we expected inflation to fall to under the two percent upper limit, we now, due to recent increases in oil prices and food prices, expect that to happen not before about the end of this year and we also expect … for inflation to remain about that level for some time to come. But that is looking really far ahead."