Brussels, June 13: Inflation is receding significantly and risks remain to the growth outlook, although it is too early to discuss fresh interest rate cuts for the euro zone, European Central Bank President Wim Duisenberg said on Thursday. Duisenberg’s comments, when at the same time he still insists there is room to manoeuvre on rates, were taken by financial markets as a second attempt in two days to ratchet back widespread expectations for cheaper credit — and not a sign the ECB’s two-year monetary easing cycle is over. “He’s curbing the likelihood of a rate cut in the next two months,” said Chris Gothard, currency analyst at Brown Brothers Harriman in London. Duisenberg painted a sufficiently uncertain picture for the 12-nation economy, which stagnated in the first three months of this year, to convince markets that he still sees only a weak propensity toward growth in the months ahead.
“Economic growth in the first half of ‘03 is likely to have been weak, very weak, and expectations for annual average growth of this year and ‘04 have had to be scaled down,” Duisenberg told the European Monetary Affairs Committee.
Corporate restructuring is taking its toll, pushing up the unemployment rates and global growth is sluggish with the SARS virus posing another impediment to the outlook.
“Downside risks to economic growth remain,” Duisenberg told the European Monetary Affairs Committee.
Even though Duisenberg repeated comments made earlier this week — namely that “I think it is too early to now start discussing and speculating about future interest rates moves” — he also repeated to Parliament the ECB has room to act. Bureau Report