Frankfurt, 08/08/2003 (Agence Europe) - In its report for August 2003, the European Central Bank, asserted that recent and monetary developments confirm that the direction of current monetary policy is appropriate (therefore no expectations of a further lowering in interest rates, following the reduction in June to the historically low level of 2% (EUROPE 6 June p 12). The ECB has interpreted increasing indications of a gradual recovery in economic activity in the second half of 2003 and further strengthening in 2004. According to the ECB, external demands should contribute to recovery in the Euro zone. Economic date in several regions tend to confirm the forecasts for strengthened activity - which should help to compensate for he negative impact of the Euro's appreciation. At the same time, the ECB admits that risks continue to weigh on this "scenario" and that there is a need for further correction in the macro-economic imbalances outside of the Euro zone, which would still hinder a sustained recovery in the world economy. In the Euro zone, "the extended period of low interest rates" has indeed contributed to protecting against the risks to economic growth, underlines the Bank. The ECB also indicated that inflation in the Euro zone is expected to be in the medium term at a level below but near 2%.
The panel of ECB economists consulted during the quarterly investigation made similar forecasts for inflation (1.9% in 2003 and 1.5% in 2004) but appear less optimistic about growth. It therefore has set its forecasts at a lower level 0.7 in 2003 (instead of 1%) and 1.7% in 2004 (instead of 2.1%).