The European Central Bank (ECB) will not change its monetary policy under its new definition of price stability, according to a member of the bank's executive board. The bank said last week it will aim to maintain inflation at "close to" 2pc in future as opposed to its previous goal of maintaining it "below" 2pc. Some economists believe this will lead to the ECB targeting a slightly higher inflation rate, offering it greater leverage to lower rates. But speaking at a banking conference in Frankfurt, Eugenio Domingo Solans said it was not correct to assume the ECB will run a looser monetary policy as a result of the "clarification".
"This interpretation is not the right one. Our objective is to have an inflation rate below 2pc, and we will not be satisfied until the perspectives in the medium term for inflation are below 2pc," he said. "There is no new definition of price stability. Nothing has changed." Solans also said the eurozone recovery should start late this year, but added that it is still unclear whether growth will reach the potential rate of 2.0-2.5pc in 2004. In its most recent economic projections, the ECB forecast growth of 1.9-2.9pc for next year//www.fxcentre.com