The European Central Bank's monetary policy is in neutral and policymakers have not made any decision on a future rate increase, ECB Governing Council member Mr Guy Quaden said today.
The ECB had not "pre-decided" on a rate rise and did not envisage such action for some time but would remain vigilant, Mr Quaden told the Financial Times.
"We are not expecting a rate hike in the coming months," Quaden was quoted as saying by the FT'sGerman edition.
The ECB is widely expected to keep rates on hold until 2005, but debt futures are pricing a hike by the end of the year as recovery builds in the 12-nation euro zone. The bank reviews its official benchmark interest rate, currently 2 per cent, on August 5th.
Mr Quaden, who is also the central bank governor for Belgium, was quoted as saying another rate cut was unlikely given that growth was starting to accelerate.
"The first quarter was better than expected. Preliminary second quarter figures are favourable," he said.
But recovery in the euro zone remained uneven, with Germany vulnerable to a global slowdown, he said. "It is only running on one motor - external demand," Mr Quaden said. He cited geopolitical uncertainty and the US current account deficit as risks to the outlook.
Mr Quaden said inflation, which has pressed firmly above the ECB's 2 per cent ceiling this year to post a 2.4 per cent gain in June data after a 2.5 percent reading in May, was disappointing.
But he told the Financial Timesthat pressures seemed to be "limited to surging oil prices and indirect taxes and public (government-controlled) prices".