Rate cut not an option for ECB - Trichet

European Central Bank President Jean-Claude Trichet said today that a cut in euro zone interest rates was not currently an option for the guardian of the euro.

Neither did the bank's policy-setting governing council discuss a possible rate hike at its regular monthly meeting today, Trichet added.

At today's meeting in Frankfurt, the ECB held its key 'refi' refinancing rate steady at 2%, where it has been since June 2003.

'All in all, we have not changed our assessment of risks to price stability over the medium term,' the ECB chief said. 'So far, we have seen no significant evidence of underlying domestic inflationary pressures building up in the euro area. Accordingly, we have left our key interest rates unchanged,' he added.

The guardian of the euro also held its other two key rates - the deposit rate and the marginal lending rate - unchanged at
1% and 3% respectively.

Earlier today, the Bank of England also held its own rates unchanged for the eighth month on a row.

ECB watchers had unanimously predicted that euro zone borrowing costs would remain where they were, so the euro was stable at around $1.2910 immediately after the rate announcement.

The ECB President also warned today that the runaway price of oil could put the brakes on economic growth in the 12-country euro zone and fuel inflationary pressures in the single currency region.

High oil prices were having a 'very unwelcome' impact on growth and inflation, Jean-Claude Trichet said. 'Persistently high oil prices pose downside risks to growth,' he said.

And they could also keep area-wide inflation above the ECB's ceiling of 2% in the coming months. In March, area-wide inflation stood at 2.1%, the same as in February.

'In the coming months, annual inflation rates are likely to remain somewhat above 2%,' which the ECB views as the maximum tolerable level, Trichet said. However, the exact figure 'will depend largely on how oil prices develop,' he added.

Turning to economic developments as a whole, the ECB chief said that 'recent data and survey indicators on economic activity have been mixed.' On the whole, 'they point to ongoing economic growth at a moderate pace over the short term,' Trichet said.

But there were 'no clear signs as yet of a strengthening in underlying dynamics,' he added.

Looking further ahead, the conditions remained in place for moderate economic growth to continue, Trichet insisted.
Global growth remained solid, 'providing a favourable environment for euro area exports,' he continued.

On the domestic side, investment was expected to continue to be supported by very favourable financing conditions, improved profits and greater business efficiency. And consumption growth should develop in line with real disposable income growth, Trichet said.