Eurozone economic growth should pick up later this year, according to the European Central Bank (ECB), but it warned that growth would be slower than previously anticipated. Speaking following the bank's decision to cut rates by 25 basis points to 2.50pc - its second rate reduction in four months - Wim Duisenberg said the outlook for economic growth this year had weakened compared with previous expectations, owing to the crisis in Iraq and the associated rise in oil prices. "Accordingly, only a very modest rate of economic growth should now be expected this year," he said. He added that any judgement on future developments "is overshadowed at present by the geopolitical tensions and their potential resolution".
Duisenberg also said that monetary policy cannot address this kind of uncertainty, but claimed that the bank "stands ready to act decisively and in a timely manner". In his statement this afternoon, the central banker claimed that the outlook for price stability over the medium term had improved in recent months, due to subdued economic growth and the appreciation of the euro. ///www.fxcentre.com