Bundesbank president Mr Ernst Welteke reiterated today that he favoured a "steady hand" policy on European interest rates and said he did not expect the slowdown in the euro-zone economy to last long.
In a foreword to the Bundesbank's annual report, published today, Mr Welteke said that a "steady-hand" monetary policy on the part of the European Central Bank was required to calm the financial markets.
"A predictable 'steady-hand' monetary policy can make a decisive contribution to stabilising expectations on the financial markets," he wrote.
The primary task facing the ECB was "to continue to keep inflationary risks to a minimum and counter any second-round effects arising from high oil prices."
The report was released just a day before the ECB's governing council, the body responsible for setting euro-zone interest rates, was scheduled to hold its regular fortnightly meeting.
A large number of economists expect the euro bank to shave just a quarter of a percentage point off its key rate which has remained unchanged at 4.75 per cent since October.
But Welteke's "steady-hand" comment, a key phrase regularly interpreted by the markets as a signal for no change in rates, dampened the rate cut speculation and the euro eased against the dollar.
AFP