European Central Bank President Mr Wim Duisenberg reaffirmed that ECB interest rates were on hold for some time and said the euro's recovery was likely to continue. Mr Duisenberg said that the risks to price stability were not very "concrete" at present and therefore did not allow any firm conclusions.
"There are good reasons for the expectation that the recovery of the euro will continue," he said. The euro ended at $0.9257 yesterday as a result of recent evidence of an economic slowdown in the US.
"We are seeing that oil prices are falling but not as strongly as we had hoped. We are also seeing that the euro's exchange rate does not appear to be falling, as was the case for a long time," Mr Duisenberg said.
"These risks to price stability are lessening at present. We are seeing clear signs of a weakening of growth in the US. On the other hand, tightness in the labour market is emerging in various parts of the euro area, which is worrying us.
"So one cannot draw specific conclusions at the moment, not even for the near future. I will not signal an interest rate bias of the central bank."
Mr Duisenberg's remarks are in line with the ECB's current "wait-and-see" policy on interest rates and underscore the market's view that the bank is unlikely to change interest rates in the foreseeable future.
Officials from the bank have stressed in recent weeks that despite recent signs of a slowdown in euro-zone economic growth, there was still a risk that recent oil price increases and the after-effects of earlier euro weakness could spur inflation.
Asked if financial markets had been premature in expecting an ECB rate cut in the first half of 2001 after seven rate increases since November 1999, Mr Duisenberg replied: "I will leave it up to markets what they expect. I don't want to give them any pointers - neither in the one nor the other direction."
Mr Duisenberg said financial markets reacted to any inflation data, even regional, and that it would be better if Germany did not publish state inflation data which were used to calculate preliminary pan-German inflation figures each month. "They often cause markets to move," he said.
Mr Duisenberg, who has been criticised for the way he communicates ECB policy, said improving communication was one of the bank's biggest challenges and that ECB officials must discipline themselves. "I expressly include myself in that," said Mr Duisenberg. He has repeatedly come under fire for appearing to lack sensitivity about how markets will react to what he says. ECB officials were aware they must coordinate their statements to speak with one voice, Mr Duisenberg said. "But at the same time we should accept that this voice must be expressed by a large number of people in many languages and cultures." Mr Duisenberg said he was disappointed that the ECB had failed to convey to the public that the euro came into being two years ago and that the introduction of notes and coin would not mark its formal arrival. "That is a shortcoming, one can talk of a failure here," Mr Duisenberg said.
Euro cash is due to be introduced in early 2002. The ECB had also not succeeded so far in conveying the successes of the new currency to the public in a convincing way, Mr Duisenberg said.
