European Central Bank president Mr Wim Duisenberg kept financial markets guessing on the prospect of interest rate cuts yesterday by saying that oil prices and euro weakness had bloated inflation only temporarily.
Mr Duisenberg also said the ECB had succeeded in ensuring price stability but that inflation control remained the top eurozone priority, and that wage moderation was needed to meet the goal.
Other ECB figures made it clear at the same time that they saw no reason to rush into rate cuts on the heels of the Federal Reserve's recent easing of credit costs to try to head off an abrupt US economic slowdown.
The ECB would now focus on "avoiding possible secondround effects of the temporary increase in inflation," Mr Duisenberg said.
ECB chief economist Prof Otmar Issing said in an interview published yesterday that the euro-zone central bank was in no hurry to take the US Fed's cue. A report for the European Parliament by seven leading economic think-tanks published yesterday said euro-area growth in 2001 and 2002 was likely to undershoot official EU forecasts.
The institutes said, however, they did not expect the European Central Bank to cut its main interest rate before early 2002 unless growth slowed even more than expected or if the euro rose more strongly.
The institutes forecast euroarea GDP would rise by 2.8 per cent this year and by 2.7 per cent in 2002. They also forecast euro-area inflation would be 2.2 per cent this year and decline to 1.5 per cent in 2002.
They projected the euro rising slowly but steadily through 2001 to reach around $1.05 by the end of 2002.
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