The European Central Bank is unlikely to cut its key interest rates while euro-zone inflation remains above 2.2 per cent, a top Bundesbank official said in a magazine interview to be published later this week.
"The ECB will not cut rates too quickly," said Klaus-Dieter Kuehbacher, a member of the Bundesbank's central council, in an article to be published in the financial weekly
Focus Money
tomorrow.
Mr Kuehbacher, president of the regional central bank of Berlin and Brandenburg, said that, as a relatively young institution, the ECB needed to build up public confidence in its policy decisions.
That included pursuing a so-called "steady-hand" monetary policy, something which the ECB had unfortunately ignored in its series of small, but relatively frequent rate hikes over the past year and a half, Mr Kuehbacher complained.
The Bundesbank council member predicted that the ECB would not cut rates until euro-zone inflation, as measured by the harmonised index of consumer prices (HICP), slowed to below 2.2 per cent.
Area-wide HICP slowed to 2.4 per cent on a 12-month basis in January from 2.6 per cent in December, but was unlikely to reach 2.2 per cent until June or July, Mr Kuehbacher said.
The ECB defines price stability as price increases of no more than 2.0 per cent on a 12-month basis.
Any rate cut would have to coincide with fears that the euro-zone economy was facing a sudden and sharp slowdown in 2002, he argued.
AFP