ECB: European interest rates 'appropriate'

Wim: No reason for the ECB to change its mind

European Central Bank (ECB) President Wim Duisenberg attempted to send out a strong signal that interest rates will not be cut at the bank's next meeting on Thursday.

In an address to the European Parliament, Mr Duisenberg said the bank had no reason to change its view that its current benchmark interest rate - currently at 4.5% - was appropriate.

Eurozone money supply growth, he said, had just started to stabilise, and annual inflation was on course to fall to an average of 2% next year.

But Mr Duisenberg's remarks, the latest in a series of statements in favour of leaving rates unchanged, are unlikely to diminish pressure for a cut on Thursday.

The eurozone was hit by another rash of gloomy economic data on Tuesday.

The European Commission said its economic sentiment index for the euro area fell to 101.1 in June from 101.8 in May, its sixth consecutive monthly slide.

Consumer-confidence indexes also fell in France and Finland.

Last week, the US Federal Reserve cut interest rates for the sixth time this year.

Charm offensive

Mr Duisenberg's speech to the European Parliament was the culmination of a determined campaign to quell speculation ahead of the ECB meeting.

The ECB is due to meet on Thursday

Over the last few days, he has made a series of speeches, arguing that the ECB's job was not to jump-start the European economy.

Instead, the focus should be on inflation and monetary discipline, he argued.

"It is our strong belief that if the ECB is successful in maintaining price stability and thereby creating an environment of predictable stability for entrepreneurs, that is the best contribution the ECB can make to fostering growth and employment," he told the parliament.

Mr Duisenberg's latest speech caused the euro to ease fractionally against the dollar.

But many market participants still see the campaign as a smokescreen, aimed at ensuring surprise if the ECB does in fact cut rates.