9 August 2001, 15:58  German deputy minister says ECB rate cut would help

BERLIN, Aug 9 - Siegmar Mosdorf, a deputy minister in Germany's Economy Ministry, was quoted on Thursday as saying lower German inflation and a rate cut by the European Central Bank would help revive Europe's largest economy. According to a transcript of an interview with NDR4 radio, Mosdorf said he was sure German inflation would continue to fall after data released on Wednesday showed inflation in July was 2.6 percent, down from 3.1 percent in June. "That opens room for the purchasing power of people in Germany and above all for the European Central Bank to reduce interest rates in autumn," he said. "Both would do the economy good and would also relieve us a bit," the deputy minister said. Michael Rogowski, head of Germany's BDI industry federation, told he also saw room for the ECB to reduce rates slightly if inflation continued to go down. "We should not push the ECB to take unjustified steps. But if inflation continues to fall as at present I could understand some small interest rate reductions," Rogowski said. He added German trade unions must play their part and avoid making hefty demands in upcoming wage negotiations. Most analysts expect the ECB to cut rates in the third quarter although are divided on whether a move will come as soon as the bank's next meeting on August 30. Mosdorf's comments came a day after Chancellor Gerhard Schroeder revised down his 2001 growth forecast to between 1.5 and 2.0 percent and suggested he might not reach his goal of cutting unemployment to 3.5 million by elections next year. Mosdorf said the slowdown in the United States and Japan was taking its toll on an export-oriented economy like Germany and admitted the unemployment goal was under threat. "That is a bit in danger now because we have economic conditions that have become somewhat tougher," he said.

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