There is no sign so far of underlying inflationary pressure building up in the euro zone, the Deutsche Bundesbank said in its August monthly report, published Monday. There is therefore no need for the European Central Bank to adjust monetary policy, the Bundesbank said in the report. However, oil price increases during the summer months and a weakening euro during the first half of the year have tended to increase inflation risks, the Bundesbank cautioned. The ECB left its key refinancing policy rate unchanged at 2.00% earlier this month, and hasn't altered that rate since June 2003. Given the weak economic recovery in the euro zone, most private economists don't expect the ECB to raise rates before the second quarter of 2006. The Bundesbank also expressed concern about excess liquidity in the euro zone, which requires "continued close monetary vigilance." The Bundesbank noted sinking medium- and long-term market rates and the resulting flattening of the interest rate curve. This development is supporting the preference of investors for high-liquidity products and is driving up credit demand, "especially for real estate and corporate financing in the euro zone," the Bundesbank said. German banks registered growth in private credit demand during the spring, the Bundesbank noted. "From the financing side, there is nothing standing in the way of a stronger recovery of economic growth also in Germany," the report said.