Bundesbank vice-president Mr Jürgen Stark gave weight yesterday to the European Central Bank (ECB) keeping rates unchanged, saying that monetary policy poses no barrier to a pick-up in European growth.
Mr Stark, who often attends ECB policy meetings, is the latest of a string of central bankers to call the 2.5 per cent official ECB rate conducive to a recovery, although he and another top Bundesbank official said risks to the outlook remained.
"The current stance of monetary policy in Europe, as well as globally, is highly accommodative. In particular, the monetary policy of the ECB is not a barrier to economic recovery," Mr Stark said in a speech prepared for a Munich Economic Summit.
Bundesbank chief economist Mr Hermann Remsperger said at a separate event that growth in the euro zone and Germany would improve this year.
The Bundesbank comments come even as there was fresh evidence of a weakening of euro- zone manufacturing. A survey of purchasing managers, conducted after Baghdad fell to US forces, slipped to 47.8 per cent in April from 48.4 in March, the lowest reading since January 2002.
The ECB is widely expected to leave rates unchanged for the second straight month, although many analysts say a listless European economy should cause the ECB to ease the credit strings again in June. The latest prominent economist urging an ECB rate cut was Ifo Institute for Economic Research president Mr Hans-Werner Sinn: "There is no reason to have such a tight monetary policy." He said the ECB had room to lower rates gradually to the 1.25 per cent level of the US Federal Reserve.
