Austria urges no rate rise as ECB notes risks

Austria joined France in urging the ECB to keep interest rates steady.

Austria joined France in urging the ECB to keep interest rates steady.

An ECB policymaker gave a clear warning that the ECB is ready to raise rates again if needed, saying euro zone economic growth is improving and that inflationary risks from high oil prices persist - and could climb even higher.

But Austrian Finance Minister Karl-Heinz Grasser said another ECB rate increase following a rise in December would be counterproductive and unnecessary. This was because low-core inflation gives the ECB room to support economic growth in the euro zone, the International Herald Tribunereported today.

"In my mind, we have a pretty stable situation," Mr Grasser was quoted as saying, adding it was his "clear understanding" that the ECB would not engage in a series of rate hikes, like those seen in the United States. "I don't expect these steps to happen in the Europe."

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Mr Grasser made similar calls for ECB restraint 10 days ago.

Two days earlier, French Finance Minister Thierry Breton also said there was no need for another rate rise, and that he would discuss the matter with the ECB at a meeting next week of the Eurogroup, which comprises euro zone finance ministers.

ECB chief economist Otmar Issing gave a fresh assurance in an interview released today that euro zone growth is steadily improving. Risks to recovery "have clearly diminished", he said.

"Almost all data show that the upswing is continuing and strengthening", Bloomberg quoted Mr Issing as saying.

His comments appeared a little more upbeat than the ECB's assessment in the editorial of its monthly bulletin, released today which was a close repeat of its January policy statement.

"Risks to the outlook for economic growth continue to lie to the downside and relate to high and volatile oil prices, concerns about global imbalances and the level of consumer confidence in the euro area, although the latter is improving," the ECB editorial said.