Bundesbank Deaf to Calls for ECB Rate Cut | Business| Economy and finance news from a German perspective | DW | 17.05.2005
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Bundesbank Deaf to Calls for ECB Rate Cut

The current level of interest rates in the 12-country euro zone is no impediment to growth in the region, the Bundesbank wrote in its May monthly report published on Monday, implicitly rejecting recent political calls for lower rates. "As far as monetary policy is concerned, the conditions are in place for more growth and employment," the German central bank wrote. Economics Minister Wolfgang Clement recently complained that the current cost of borrowing in Europe -- the ECB has held its key rates steady at 2.0 percent since June 2003 -- was not concurrent with German interests and that the bank had room for maneuver on rates. The Bundesbank disagreed. "Price developments are continuing to support purchasing power," and the low level of interest rates were an incentive to spend, it argued. And it lobbed the ball back into the government's court, saying that "in order to overcome the weakness of domestic demand, further decisive (structural) reforms are imperative."

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