ROME, July 18 - Record low interest rates will lift the economy over the next 18 months and further easing will only come if future data suggests action is needed, the European Central Bank vice president was quoted as saying on Friday. Lucas Papademos told Corriere della Sera newspaper in an interview that the economic situation had changed little since the ECB last cut interest rates in June. "We might have room for manoeuvre in the future but this will depend on new information that will allow us to determine whether further reductions are needed," he said.
"Current interest rates are at record lows, which, together with the global recovery, will sustain a gradual pick-up in the second half of 2003 and in 2004," he added. Asked what factors might threaten an economic recovery, Papademos said the "considerable U.S. deficit" might cause problems as well as a heavy debt burden run up by consumers in many countries -- especially the United States. Papademos said he did not expect to see deflation in the euro zone. "As far as we are concerned the risk of deflation in the euro zone is very low, nothing," he said. "The ECB's monetary policy looks to maintain an inflation rate that is beneath, but near to two percent in the medium term in order to ensure a sufficient margin against deflation risks." Papademos said the recent rise in the value of the euro had reduced profit margins for companies: "But on the other hand it has also had positive effects," he said, adding it had helped reduce inflationary pressures.//