ECB talks down likelihood of interest rate cuts

European Central Bank (ECB) vice-president Mr Lucas Papademos said the bank does not feel under pressure to cut interest rates…

European Central Bank (ECB) vice-president Mr Lucas Papademos said the bank does not feel under pressure to cut interest rates even though risks to euro zone growth have increased.

Speaking in an interview with the Allgemeine Zeitung, Mr Papademos repeated that the ECB sees the risks to price stability as balanced, with "the upwards risks balancing out the downwards risks".

Mr Papademos pinpointed the oil price rises, high liquidity and wage settlements as upward risks but said the plunge in US equity markets and only gradual economic recovery in the euro zone represent downward risks.

Asked if the ECB feels under pressure to cut rates, Papademos replied: "In no way".

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Several ECB pundits had suggested the dovish tone of its September monthly bulletin had given the impression a rate cut is possible by the end of the year.

But Mr Papademos made clear it is not correct to draw the conclusion from the report that the probability of an interest rate cut "in the immediate future" has increased.

He also dismissed the risks from a possible bout of deflation in the euro area at the moment as "negligible".