Brussels, 01/07/2004 (Agence Europe) - On Thursday the European Central Bank (ECB) decided to keep interest rates unchanged and which remain, in effect, at the same rate sine June 2003. The minimum bid rate for major operations, as well as interest rates for the marginal lending facility and the deposit facility will remain unchanged at 2.00%, 3.00% and 1.00% respectively.
ECB president Jean-Claude Trichet declared to the press that although inflation would persist in the short term, prospects complied with the objective of price stability in the medium term. He added that after experiencing GDP growth of 0.6% in the first quarter of the year, economic recovery would continue in the euro zone, as well as conditions for supporting and strengthening growth. Mr Trichet explained that exports from the euro zone and investments within the zone were expected to pick up but that there were factors that could counteract this outcome. These include price levels that are currently high but the objective of 2% inflation set by the ECB appears to have been attained in the short term, according to Mr Trichet. He explained that although oil prices had lowered they still remained high and could impact on euro zone exchange rate conditions. Eurostat is forecasting an inflation rate of 2.4% annually in June (it stood at 2.5% in May). Trichet considers, without being too concerned, that the rate of inflation should be higher than 2% for the remainder of 2004 and even for part of 2005. He also underlined that fact that unit labour costs would be decisive factors in the development of inflation. He considered that long term prospects remained in keeping with price stability policy and although wages were rising moderately as indicated by recently figures, he urged social partners to go beyond current inflation rates.
Key words were "vigilance" and avoiding hasty conclusions, was the way in which Trichet characterised the analysis of the future economic and monetary context. The next meeting of the Board of Governors on European rates will take place on 2 September. According to most economists, the ECB is not expected to change rates before the end of the year or even before the beginning of 2005.