VIENNA, April 4 - Senior European Central Bank officials onWednesday said that price pressures were easing in the common currencyzone, but gave no further clues to signal a change in the bank's 'wait andsee' rate stance. Bundesbank President Ernst Welteke, Austrian Central Bank GovernorKarl Liebscher and Greek Central Bank Governor Lucas Papademos, allmembers of the ECB council, were commenting as evidence of the slowereuro zone growth continued to mount. Welteke specifically linked cooling regional growth to lower inflation risks,which analysts say was a powerful argument in favour of a rate cut, andsaid that the euro was undervalued. The currency has weakened in recent weeks following a series of economicdata showing the euro zone economy is slowing, and amid hopes that theU.S. will stage a speedy recovery from its current downturn. The euro wasquoted at $0.8950 at 0630 GMT. Financial markets are primed for a change in tack at the bank, which hasheld rates steady since October despite easing by other top central banksto ward off slower world growth. A statement issued on Friday on behalfof ECB President Wim Duisenberg reiterated the bank remained wary ofprice pressures. But analysts expect a cut at its next council meeting, on April 11. TheInternational Monetary Fund has said that a cut would be helpful, andDuisenberg could hint he is leaning in this direction when he speaks inBerlin later on Wednesday. Other ECB officials speaking on Wednesday include executive boardmember Domingo Solans, as well as Bank of Italy Governor Antonio Fazioand Bank of Spain Governor Jaime Caruana. Welteke told German magazine Focus Money that money supply growthhad been slowing since spring 2000. "So from the monetary side the risks to future price stability havedeclined," Welteke was quoted as saying. In addition, the "slight weakening of economic growth is lessening pricepressures in the euro zone," Welteke said. Focus Money released a summary of the interview in advance ofpublication.
INFLATION HEADING UNDER TWO PERCENT
Liebscher, speaking to reporters separately at the presentation of anInternational Monetary Fund report on Austria, stressed the need forcontinued caution but admitted that these risks were diminishing. "As far as the medium term outlook for price stability in the euro zone isconcerned, the risks are now certainly somewhat more balanced than wasthe case several months ago," he said. Euro zone consumer inflation rose to 2.6 percent in February from 2.4percent the previous month, well above the ECB's self-imposed policytolerance threshold of two percent. Much of the blame for this advance has been pinned on a surge in world oilprices last year and as this pressure fades, inflation is seen heading lower. "Generally the prospects today for the return of inflation to a levelcompatible with price stability are better than they were in the fall of2000," Papademos said in Athens. He also cited slower money supply growth, which has abated thanks to aseries of ECB rate hikes last year, as a reason for confidence that the eurozone price trend was favourable. Markets are on red alert for a change in tone at the ECB after a surprisestatement from Duisenberg on Friday in which he said the bank wasmaintaining a "wait and see" stance on rates. It came after some top ECB officials had appeared to signal a softening inthe bank's rhetoric with remarks that fanned speculation of a rate cut soon. Pressure on the ECB to help stoke economic growth by cutting itsbenchmark 4.75 percent interest rate has mounted amid evidence that thechill from the slowing United States economy had spread to the euro zone. A 12,000 increase in March German adjusted jobless numbers to 9.8percent, compared with forecasts for a decline of 5,000, and a fall to atwo-year low in ' Euro zone service sector index were the latestsigns that conditions were cooling. IMF Managing Director Horst Koehler said on Monday that an ECB ratecut "would undoubtedly be helpful for the European economy" and that theIMF had revised down its 2001 growth forecast for the euro zone to 2.5percent from 3.4 percent.