The European Central Bank sees early signs of a recovery in domestic demand, the missing ingredient for healthy growth in the euro zone, but ECB policymakers signal they are in no rush to raise rates as they await more data.
In separate interviews published today, ECB President Jean-Claude Trichet and Governing Council member Axel Weber said they were waiting for more information on the strength of the euro zone's patchy recovery.
"There are recent signs of greater dynamism in investment and internal demand," Trichet said in an interview with Italian newspaper Il Sole 24 Ore. "We will understand the situation better with the data for the first quarter of 2005," he said.
"I would say that for now we confirm our expectation of continued moderate growth in the euro zone." Growth stumbled late last year, disappointing the ECB when gross domestic product expanded at only 0.2 per cent in the fourth quarter, half the pace most analysts expected.
That prompted the ECB to revise downward its 2005 GDP projections to 1.6 percent from 1.9 per cent, and it appears to have delayed any ECB move toward tightening monetary policy. ECB rates have been at a record low of 2 per cent since June 2003.
Given the uncertain outlook, the head of Germany's central bank indicated the ECB was in no hurry to raise rates. "We'll take our time to analyse the data and monitor them closely. When we think it's appropriate to act, we will," Weber said in an interview with financial news agency Bloomberg.