European Central Bank (ECB) policy makers stuck to their guns after politicians urged them to lower interest rates by saying already cheap cash is not preventing the euro zone economy from growing faster.
An unexpected rise in Germany's Ifo index, based on a survey of 7,000 firms, posted a first sign in a busy data week that the single currency bloc is picking up, confirming the ECB's view its benchmark rate at 2 per cent is no brake on recovery.
"In our view, the interest rates in the EU are at a historically low level, which corresponds to economic conditions," ECB Executive Board member Ms Gertrude Tumpel-Gugerell was quoted today as saying.
The ECB's comments are bound to disappoint France and Germany, the euro zone's two biggest economies, which urged the central bank at a weekend meeting of top economic powers to cut rates, according to a European Union source.
Financial markets may get the message from the top later on the day when ECB president Mr Jean-Claude Trichet addresses the Economic Club of New York at 4.30 p.m. Mr Trichet has repeatedly indicated rates are on hold as long as data are mixed and it remains unclear how strong the economic recovery is.
Bundesbank Vice President Juergen Stark, temporarily an ECB Council member after his boss Mr Ernst Welteke resigned in a hospitality scandal this month, joined Ms Tumpel-Gugerell.
"The interest rate level in the euro zone is not putting a brake on growth," Stark told Frankfurter Allgemeine Zeitung.