The fact that rate cuts are back on the agenda at other central banks is not enough to persuade the European Central Bank to loosen monetary policy, an ECB board member said today.
But weakening economic prospects for Sweden and the United Kingdom, which prompted the Riksbank this week to slash its official rate by half a percentage point and caused two Bank of England policymakers to argue for a rate cut, have not gone unnoticed at Europe's largest central bank.
"It is a very important element to take into account, what other central banks are doing and what is the economic situation in these countries," Jose Manuel Gonzalez-Paramo said at an international economics conference.
"But it in no way changes the analysis that the ECB makes of the reality of the euro area, and of the needs that the area has on the subject of monetary policy," he said. "Interest rates are suitable," Mr Gonzalez-Paramo said, adding that the economic situation has changed little since the ECB two weeks ago decided to hold its official rate at 2 per cent.
Markets have speculated this week that the ECB may loosen the credit strings, a view that mounted after the Riksbank broke the 2 per cent rate barrier and cut to 1.5 per cent on Tuesday despite protesting earlier that cheaper money would do little to revive lacklustre growth.
The Bank of England minutes released on Wednesday fuelled the rate cut speculation when it showed two policymakers favoured a cut for the first time in nearly two years.