Euro-zone interest rates will remain on hold for some time as the ECB refuses to follow the rate-cutting lead of the US Federal Reserve, the Bank's president has indicated.

Speaking in Frankfurt after a meeting of the ECB's governing council left interest rates unchanged at 4.75 per cent, Mr Wim Duisenberg said Europe's economic outlook remained cheerful.

Acknowledging that the risk of inflation had subsided somewhat, he signalled that the Bank's monetary policy bias had switched to neutral after a lengthy period of tightening. But he insisted that there was no indication that the policy was too restrictive and he saw no reason to cut rates in the immediate future.

"Notwithstanding the assessment that the risks to price stability are now more balanced, there are still factors posing upside risks which therefore require continued attention. These are mainly related to potential second-round effects on wages of the past increases in import prices, as well as to bottlenecks and shortages in labour markets.

"For the medium term, it remains paramount that wage developments remain moderate," he said.

Mr Duisenberg predicted that a downturn in the US economy would have only a limited impact on the euro zone because exports outside the zone account for only 17 per cent of overall GDP.

"The impact of events outside the euro area is not so significant. The euro area is a much more closed economy than its constituent parts were previously," he said.

Presenting an upbeat assessment of Europe's economic prospects for the next 18 months, Mr Duisenberg predicted economic growth would remain strong and would be close to 3 per cent this year and in 2002.

Insisting that the ECB made its own decisions on interest rates, regardless of the Fed's actions, he suggested that there was no prospect of a rate cut in the near future.