4 September 2002, 09:00  ECB Policy Makers Signal No Cut in Interest Rates

/www.bloomberg.com/Paris, Sept. 3 (Bloomberg) -- Two European Central Bank policy makers said interest rates aren't holding back growth, suggesting they won't support a cut in interest rates.
``Financing conditions for companies are favorable,'' ECB council member Ernst Welteke told Bloomberg Television. Jean- Claude Trichet said the best contribution the bank can make to boosting confidence is to combat inflation.
Europe's economy is struggling to rebound from last year's slowdown. Italian consumer confidence dropped to the lowest level in more than three years in August and German executives were more pessimistic in August than at any time since February.
The ECB pared interest rates four times last year to 3.25 percent. The yield on the three-month futures contract due in December fell to 3.19 percent at 6 p.m. Paris time.
``Contrary to what sometimes happened in the past, I hear very few protests about the level of medium- and long-term interest rates,'' Trichet told reporters at a conference.
M3 money supply, the ECB's gauge of future inflation, grew 7.1 percent from a year ago in July. The ECB aims to keep annual M3 growth at about 4.5 percent. Private credit grew at an annual 4.9 percent pace in July, after growth of 5.4 percent in June.
``It's hard to argue that with such dynamism in monetary aggregates, we really are hampering growth in Europe,'' Trichet said in a separate interview with CNBC.
Slowing Economy
The yield on German 10-year government bonds, a benchmark for long-term borrowing costs, fell to 4.51 percent, its lowest level since November last year. That's after a report showed today U.S. manufacturing grew less than economists expected last month, suggesting global growth may be sputtering.
``The weak economic development isn't focused on Germany alone,'' Welteke said. ``Germany is going through the same development that the euro zone, the U.S. and the world economy are going through.''
Economic growth of 2 percent to 2.5 percent in the dozen nations sharing the euro by year's end is ``an optimistic assumption,'' based on currently available figures, he said.
Growth probably won't accelerate in the third and fourth quarters after growing between 0.3 percent and 0.6 percent in the second quarter, Trichet said.
``I think the global economy will pick up but there's a summer hiatus,'' said Dan McLaughlin, chief economist at the Bank of Ireland Plc. ``We're in a cyclical slowdown, and by the end of the year, we should finish that.''

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