ROME (MktNews) - The European Central Bank (ECB) is right not to have lowered official interest rates, and will probably continue to keep them on hold until it is forced into a move by downward pressure from market rates, Fiorella Kostoris Padoa-Schioppa, the President of Italian economic research institute ISAE told Market News International. "I believe the ECB is right not to lower interest rates," Padoa-Schioppa said in an exclusive interview, explaining that a rate cut would have a negligible direct impact on eurozone growth and may be counter-productive from a psychological point of view. "Whether the ECB cuts rates or not depends on what the markets do; I think there will be a rate cut, but I believe that its timing will be governed by the markets, not by the ECB. The ECB will follow the market, not lead it," she said. The publicly funded ISAE is Italy's most prominent research institute, and carries out the country's main consumer and business confidence surveys, the equivalent of the IFO and INSEE surveys in Germany and France. Cutting interest rates can significantly boost the economy "in a flexible system like the U.S. one," continued Padoa-Schioppa, but in Europe "the effect on the economy is much less." At the same time, psychologically, a rate cut would probably act as a signal of alarm that the economy is deteriorating, especially to small investors. "The ECB probably gives more of a positive signal to markets by not touching rates than if they lowered them; if they cut rates, I think the economy would react even worse," Padoa-Schioppa said. Comparing the situation in Europe and the U.S., she said that cutting interest rates sends a twin message to markets: the first, that growth is weakening, and second, that the central bank is aware of the situation and has set about resolving it. In the U.S., where she said the public is generally better informed about the state of the economy and Federal Reserve Chairman Alan Greenspan enjoys considerable prestige, the second message is stronger than the first. In Europe on the other hand, public opinion is less aware, and the ECB "is still building its credibility." For this reason, "the first message (of the weakening economy) is stronger, and the second message (that the central bank is resolving the problem) is weaker," she said. "If Duisenberg cuts rates it's as if he's telling people that things are going badly. and small investors are likely to worry." Padoa-Schioppa also said that despite the decline in the euro-dollar exchange rate after the ECB left rates unchanged at its meeting on Thursday, she doubted that a rate cut would give any significant boost to the euro.