European Central Bank President, Wim Duisenberg, said last night that the ECB would closely monitor the current global and US economic slowdown to assess any potential knock-on effects for the Euro area. But he reaffirmed his belief that the fallout from external factors would remain "limited" for the single currency area. One day after the US Federal Reserve sliced a further 0.5% off its key rates, Mr Duisenberg said: "The deterioration in the external environment of the Euro area constitutes an element of uncertainty surrounding growth prospects in the Euro area that should be carefully monitored."
He added that the slowdown in US growth might be more significant than previously anticipated, and that this would have implications for world growth and the Euro area. Until now, ECB officials have always argued that the Euro zone would be able to escape the worst of the US slowdown. In the past, Duisenberg has insisted Euro zone growth could come out near 3% this year. He did not provide a similar forecast last night.
While the US Fed has now sliced 1.5% off its key rates since the beginning of the year, the ECB has steadfastly refused to cut its key interest rates since October, arguing that inflation is still lurking in the Euro zone economy. Mr Duisenberg said last night that the ECB had taken the latest decision by the Fed into consideration, but that such a move was only one element among many others that the ECB would look at.
