VIENNA, April 28 - European Central Bank council member Klaus Liebscher said on Monday the euro zone is on track for moderate growth this year with inflationary pressures receding, and that monetary policy acts as no bar to recovery. "The current interest rate level is no hindrance to growth, no hindrance to investment," said Liebscher, who is also governor of Austria's central bank. He was speaking at an event to present Austria's 2002 balance of payments.
However, Liebscher said that uncertainties to the outlook remain despite the end of the Iraqi war. These uncertainties were cited by the ECB in April when it decided to hold its official interest rates steady at 2.5 percent. "The end of the war does not remove all uncertainties," he told reporters after his address. Liebscher said monetary policy has to do its work in maintaining price stability, while fiscal policy must hold to its task of keeping budgets in line with medium-term goals. Policy makers in general should work to restore economic optimism. "The goal now is to build up confidence," he said. Asked by reporters if he still saw inflation falling below two percent this year as previously forecast, Liebscher replied: "This is what we expect." The ECB is forecasting that as geopolitical uncertainties recede, growth will recover this year to about a 1.0 percent annual rate and inflation will fall below its ceiling of 2.0 percent, from its current level of 2.4 percent.//