The European Central Bank (ECB) needs more evidence, notably on the impact of the rising currency on growth, before deciding whether it should cut interest rates, ECB president Mr Wim Duisenberg has said.
Asked about market and government criticism that the ECB should have cut rates at its policy meeting on Thursday, he said: "The ECB does not practice a daily activist policy.
"We first have to have confirmation of the latest developments, the [impact of the\] end of the war in Iraq and appreciation of the euro.
"These must be confirmed and we will have more clarity," Mr Duisenberg said. He was speaking after receiving an award from Austrian President Mr Thomas Klestil.
The euro at its present level was not yet hurting growth, Mr Duisenberg said, despite the fact it has hit fresh four-year highs on several occasions this week and has been above $1.15.
"The euro is not yet causing me concern. . . the competitiveness of European firms is the same as on average of the past 30 years," he said.
The ECB on Thursday left interest rates unchanged at 2.5 per cent, despite widespread calls for a rate cut to offset the strengthening currency and to stimulate a weak economy.
Mr Duisenberg also said there was no fear of deflation in the euro zone, even though inflation rates varied widely between its member-states.
Critics have said the fact the ECB's monetary policy is geared towards the euro zone average risks pushing mature economies such as Germany into deflation, as high inflation in such economies as Ireland and Spain forces up interest rates.
Mr Duisenberg said the euro zone needed to embark on structural reforms energetically to speed up its growth pace.
"Economic growth can only be lifted to a structurally higher level by improving the functioning of the economy, which in the European context implies embarking on far-reaching structural reforms," he said. - (Reuters)
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