Recent economic data published in the 12-country euro zone showed that the European Central Bank was right to cut interest rates by half a percentage point earlier this month, ECB President Mr Wim Duisenberg said today.
"In line with our forward-looking strategy, we cut interest rates on the basis of reduced risks to price stability. Recent data are in line with expectations and confirm our decision of November 8th," Mr Duisenberg told a banking congress.
Two weeks ago, the ECB sliced half a percentage point off its key rates, lowering the central "refi" refinancing rate to 3.25 per cent.
Today, the ECB chief did not clarify which data he was referring to.
But he made his comments on the same day that German price data was released showing a slowdown in inflation in the biggest euro-zone economy to 1.7 per cent in November.
That means that inflation in Germany is now comfortably below the two per cent level viewed by the ECB as the maximum tolerable level of inflation.
Furthermore, third-quarter German gross domestic product (GDP) data published yesterday showed that Germany is teetering on the edge of recession.
Mr Duisenberg also said today that EU accession countries would not necessarily benefit from a speedy adoption of the single currency.
He said that a decision to adopt the single currency unilaterally would not be welcome because it would run counter to the spirit of the monetary union and hamper the process of convergence in the run-up to euro zone membership.
AFP