ECB's Welteke plays down rate cuts

European Central Bank (ECB) Governing Council member Mr Ernst Welteke discouraged talk of further interest rate cuts to boost…

European Central Bank (ECB) Governing Council member Mr Ernst Welteke discouraged talk of further interest rate cuts to boost the economy or intervention to tame the strong euro in an interview published today.

Speaking to French financial daily La Tribune, Mr Welteke also dismissed fears of deflation in Europe, saying there was no sign of a generalised drop in prices despite the "normal" easing of prices in information technology goods and energy.

Mr Welteke, who is also head of Germany's Bundesbank, noted interest rates were at historical lows in both nominal and real terms following an ECB rate cut earlier this month.

"There is enough liquidity available on the market; what more can the ECB do?" Mr Welteke replied when asked whether this month's half percentage point rate cut from the ECB had been enough.

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Asked whether it was possible to imagine central banks intervening to curb the recent strong rise of the euro against the dollar, Mr Welteke was quoted as saying: "Such discussion is not on the agenda.

"From a long-term perspective, we remain within the Deutsche mark's old fluctuation range against the dollar. Of course, our competitivity suffers as a result of export prices. But half of our exports are within the euro zone".

Mr Welteke said the absence of higher economic growth in Europe was not the fault of monetary policy, or interest rates, but a shortage of confidence and the lack of structural reforms.

The ECB lowered its benchmark interest rate by 50 basis points earlier in June, having slashed its growth forecasts for the 12-nation single currency zone for this year and the next, and said there was room for more easing if needed.