LONDON (AFX) - Bundesbank president Ernst Welteke said moderate wage rises and dampening growth prospects mean upward risks to price stability are receding in the euro zone.
In a speech to the German British chamber of Commerce here, Welteke said recently discovered distortions to M3 growth from money market funds and shares held by non euro area residents mean there are "no further risks" to price stability from money supply.
"The second pillar (broader price developments) also points in the direction of receding upward risks for price stability. External developments are dampening the prospects for euro area growth. Wages are rising but only moderately," he said.
On inflation, Welteke echoed comments made by ECB president Wim Duisenberg yesterday that the ECB is confident inflation will drop below the 2 pct stability ceiling in the course of next year.
Welteke however added it is now "probable" the ECB will not be able to meet the target of inflation below 2 pct this year.
On the current debate in the UK about the country's possible entry into the euro, Welteke said he is in no position to give advice on what currency scheme to adopt.
But he added: "In my opinion due consideration should be given first and foremost to the advantages to be had from joining European Monetary Union".
He said joining the euro would be a "mutually beneficial deal" for both Germany and the UK.