31 October 2001, 09:40  ECB Issing:HICP Below 2% In 02, Taking Longer Than Wanted

By Christian Distasio LINZ, Austria (MktNews) - Eurozone inflation will fall back below the ECB's 2% price stability limit during the course of next year, but this process of disinflation is taking longer than the central bank would have liked, ECB Chief Economist Otmar Issing said Tuesday night. "There are good reasons to expect that the eurozone inflation rate will again fall back below 2% in the course of next year, even though this process is taking longer than we would have liked," Issing said in the text of a speech here. Issing made no remarks in his text on the prospects for a near-term ECB rate cut. But he stressed that the central bank is "deaf" to calls for it to abandon its price stability focus to give a monetary boost to the weakening European economy. "We have deaf ears from all advice and calls to neglect the primacy of price stability," Issing said. He cited not only the ECB's mandate under the Maastricht Treaty but also its "inner conviction" about the importance of price stability for the economy and society as a whole. Investors around world share the ECB's view on this, Issing argued, citing low long-term interest rates based on low inflation expectations. "Against the background of current price developments and the weakness of the euro's exchange rate, this can be regarded as a remarkable achievement for a new currency," he remarked. Issing noted that monetary policy was "powerless" to prevent the temporary spikes in food and oil prices earlier this year from driving up the overall consumer inflation rate. And in reaction to economic uncertainty after the terror attacks on Sept 11, the task of the ECB was to calm market nerves "without losing sight" of its medium-term price stability goal. This was "clearly achieved," he said.

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