3 October 2001, 12:01  Buba's Welteke says ECB back to normal after 'exceptional' Sept 11 events

FRANKFURT (AFX) - Bundesbank present Ernst Welteke said the European Central Bank's is back to normal after the US terror attacks prompted it to slash interest rates on Sept 17 more for "psychological" reasons than for monetary policy considerations. Speaking last night, Welteke said the ECB Governing Council will evaluate the US Federal Reserve's latest move to cut interest rate by 50 basis points in the coming weeks. The ECB's Sept 17 decision to cut key rates by 50 basis point hours after a similar rate cut by the Fed was a coordinated move and was meant to be a "psychological, solidarity" signal, he said. Monetary policy issues were "less on the forefront" of the ECB's considerations at that time, he added. He said it was clear after the Sept 11 terrorist attacks that economic growth in the short term would be negatively impacted. The ECB will also discuss the latest developments in prices and money supply in the wake of the attacks, Welteke said, adding as an example that import prices on commodities have declined recently. Another issue for discussion is "whether interest rate cuts can influence confidence", he said. He noted that the US Federal Reserve's mandate to boost growth is different from the ECB goal of maintaining price stability. "Our orientation is to ensure price stability, which is the best contribution monetary policy can provide for growth and employment," he said. "The ECB Governing Council discusses the monetary policy situation in all its meetings and Sept 11 was ... an exceptional situation for the ECB Governing Council," he said. He said the ECB was confronted with the question at that time of how market participants may have criciticised the bank had it not followed the Fed interest rate cut on Sept 17. "But this situation now no longer exists and no longer assumes the same proportion. In the ECB, we are now returning to the regular ECB governing Council meeting, which debates and discusses monetary and currency policies and, whenever possible, makes decisions on interest rates. But when needed, it also decides on the required interest rate changes. Therefore, back to normal," he said.

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