With recovery extremely uncertain, the European Central Bank's next interest rate move could be either up or down but would not come before the Federal Reserve, a euro zone monetary source said today.
If the euro currency appreciated too far or too fast, however, that could trigger an interest rate cut, said the monetary source who is close to ECB.
"The economic circumstances in the United States and Europe are such that it would be very illogical for the European Central Bank to move before the Federal Reserve does," the monetary source said.
He said interest rates could still go either way, but only after a Fed move. The Fed's policy-making Federal Open Market Committee stated in late October that rates could be left low for a "considerable period", and as in the euro zone most central bank watchers expect no rate rise before June 2004.
One factor that could alter ECB thinking would be excessive movements in the euro exchange rate that would be problematic if it came at the same time as economic growth is fragile.