By Stefan Kramer
SIMMERN, Germany (MktNews) - Bundesbank President and European Central Bank Governing Council member Ernst Welteke said Friday evening that he was against "hectic" monetary policy decisions by the ECB, stressing that the central bank needed more data before deciding whether to cut rates in the near term.
"It is not time now to speculate on (interest rate) changes," Welteke told reporters prior to a speech here.
Welteke's comments mirror those of Austria central bank Governor Klaus Liebscher made earlier Friday, suggesting that some ECB council members may not yet be convinced of the need for a near-term rate cut.
Welteke said he supports for now the ECB's "steady hand" policy but stressed that the ECB council meets every two weeks to decide interest rate policy.
"We need more data from various indicators to make a decision," Welteke said. "The volatility in the views of the ECB watchers and bank economists should not be basis for our judgment."
While admitting that the U.S. slowdown will affect Europe, and that continued high oil prices will also dampen consumer spending, Welteke played down the extent of the current slowdown in eurozone growth.
"The current slowdown should not be over-emphasised in comparison to the growth rate which we had last year, which was twice as high as the growth rate in the 1990's," Welteke said.
Asked if eurozone growth would slow down enough to fall into the ECB's potential growth range (2% to 2.5%), Welteke refused a direct answer but indicated that he felt growth would not slow that far.
ECB officials this week moderated their previous view that eurozone growth this year would be just below 3%, though they have made no precise forecast.
But in line with the change in tenor of other ECB official comments in recent days, Welteke said he now sees some "easing of inflation pressures" in the eurozone. While core (ex-food/energy) harmonised consumer prices (HICP) may rise above 2% in the near term due to the feed-through effects high oil prices and the weak euro last year, Welteke said he expects core HICP to be below the ECB's 2% inflation limit by the end of the year.
Welteke also said he expected M3 money supply growth to continue to decelerate in coming months, as the effect of the ECB's 225 basis points in rate hikes from November 1999 to October 2000 take full effect. However, he refused to make a forecast for M3 growth in the second half of this year.
Many analysts believe that M3 growth will fall to, if not below, the ECB's 4.5% reference rate in the next two months, creating leeway for the central bank to cut interest rates. However, some analysts warn that M3 growth could accelerate again in the second half of this year.
In other comments, Welteke attributed the renewed weakness of the euro to market expectations that U.S. growth will pick up in the second half of this year. In addition, Welteke said it is possible that some U.S. investors are retreating from Europe, as shown by the recent sharp declines in European stock markets.