6 December 2001, 17:48  Duisenberg says growth to stay weak in early 2002, but rates appropriate

FRANKFURT (AFX) - European Central Bank president Wim Duisenberg said euro zone economic growth will remain weak in the early half of next year, but the level of leading interest rates is still appropriate. Speaking in an introductory statement to the ECB's news conference, Duisenberg said however that conditions are in place for euro zone growth to recover in the course of next year, with financing conditions very favourable. "Economic activity in the euro area has been weak in the second half of 2001 and will probably remain so in early 2002," Duisenberg said. Duisenberg said data published after the ECB's Nov 8 meeting, where it cut rates by 50 basis points, was in line with its expectations. Although the annual rate of M3 growth remains well over the ECB's reference value of 4.5 pct, this does not necessarily have "implications" for future price developments, he said. He said the portfolio shifts by investors seen since the the Sept 11 attacks, which have inflated M3 growth, are temporary and "should not be seen as indicating future inflationary pressures." However Duisenberg said the ECB continues to scrutinize the developments in M3 growth closely, and will reassess "persisting excess liquidity in the economy" if the current economic and financial uncertainty subsides. The assumptions behind the reference value, which the ECB had earlier left unchanged after an annual review, remain appropriate, he said. Duisenberg reiterated his belief that inflation in the euro zone should fall "safely" below the ECB's stability ceiling of 2 pct in the course of next year Movements in annual inflation may be erratic due to base effects, but the annual rates remain "clearly" on a downward trend, Duisenberg said. "In the current economic environment we should not expect medium-term upward pressures on inflation," he said.

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