The European Central Bank issued a surprise statement yesterday insisting it was keeping its "wait and see" stance on interest rates, just days after remarks by some ECB members had fuelled expectations of a cut.
The remarks came as the euro continued to struggle against the dollar in the aftermath of an ECB decision to hold rates steady. The euro stood at $0.8767 in late trading last night, two US cents down on the week, and below the 88 US cent support level. Economists have expressed fears that the currency could again test historic lows in the absence of investor confidence.
Bank of France head Mr JeanClaude Trichet, who had last week seemed to signal a shift in the bank's tone by saying it was no longer very worried about inflation, read out the statement by ECB president Mr Wim Duisenberg after a meeting of French and German finance officials in Rouen, France.
The unscheduled statement reinforced the ECB's inflation fighting credentials, saying wage developments needed to be monitored carefully due to the risk of second-round effects from past oil price increases.
The release of the statement followed Thursday's ECB council meeting which kept interest rates unchanged with the benchmark minimum bid rate steady at 4.75 per cent.
The release was unscheduled and unusual. The ECB usually issues policy statements only once a month after Mr Duisenberg has read them out at the ECB's monthly news conference in Frankfurt, or after a rate change.
