European Central Bank chiefs yesterday rebuffed mounting pressure to cut eurozone interest rates, insisting their priority is fighting inflation, not spurring flagging economic growth.
"We have to maintain price stability," said Bundesbank president Mr Ernst Welteke, who sits on the ECB's governing council. "That is our target. We are not responsible for market rates. We are not responsible for growth rates," he added.
Growth risks had increased in the euro zone while inflationary risks had diminished, he conceded. "The rise in the value of the euro and the slowdown in growth mean the risks to price stability are diminishing."
But the ECB's inflation concerns had not disappeared altogether, Mr Welteke said.
ECB president Mr Wim Duisenberg gave the same message to a banking congress in Berlin. The ECB's main goal was to safeguard price stability in the euro area, he said.
Pressure for ECB action has mounted this week but Ulster Bank chief economist Mr Aziz McMahon said the comments yesterday made an imminent rate cut less likely.
"We are not going to get a rate cut this month. There is even an outside chance there will be no rate cut at all," he said. "This is a strong line. The ECB is saying it is looking at inflation and nothing else. The market is looking for the ECB to act to support growth but the ECB's mandate is just price stability."
He said any cut in rates by the Bank of England today would throw up a sharp contrast with the ECB as it would be doing so to support growth although its mandate is also to concentrate on inflation.
