FRANKFURT (MktNews) - ECB Governing Council member Guy Quaden said Friday that interest rates were likely to be appropriate for the coming months but warned that there could be either upside or downside surprises in the new year.
In an interview with the Financial Times Deutschland, Quaden said: "The refinancing rate is probably appropriate for the coming months. But there's no guarantee. We may experience surprises next year - positive and negative ones." Quaden played down concerns on eurozone growth. "We are not slipping into a recession," he said, adding that "the problem (with the economy now) is confidence."
The stock market has "probably reached the bottom" Quaden continued, adding that the "plane has landed although it was a hard landing and bumps are always still possible." Quaden also questioned the value of the first pillar of the ECB's monetary policy, the M3 money supply growth rate.
"I am not a strong monetarist believer," Quaden said. "Money counts, but we cannot deny that we at least have a communication problem with M3. Money supply is currently not an early indicator for inflation." But Quaden dismissed any suggestion that the ECB would radically revise its current two-pillar strategy following its policy review in the first half of next year.
"There won't be a revolution. I think we will refine the strategy so that we can better work with it," he said. ECB Chief Economist Otmar Issing has already spoken in favour of the current two-pillar strategy. //www.marketnews.com