European Central Bank president Mr Wim Duisenberg today said the euro zone will escape recession and economic conditions would have to alter to warrant an interest rate change.
"We continue to regard the current monetary policy stance as appropriate for the circumstances and as appropriate for the foreseeable future," he told the European Parliament's Economic and Monetary Affairs Committee today.
The ECB has cut rates by two half percentage points to 3.25 per cent since the September 11th attacks on the US but the IMF, in a statement shortly before Mr Duisenberg spoke, said the bank had scope to cut again.
Mr Duisenberg said the attacks on the US had weakened the world economy but uncertainty would fade in the months ahead and, although growth in the 12 nation currency bloc would be weak in early 2002, a recovery was not in doubt.
"The conditions are in place to improve in the course of 2002...the fundamentals are sound," he said, reading from a statement which echoed large parts of the editorial from the bank's December bulletin.
He subsequently added that the euro zone was currently in the "trough" of the slowdown.
He said that although growth was currently very weak, he did not think that the bloc would enter a recession, although he was careful not to define what the ECB would regard as a recession.
Private sector economists are banking on a recovery in the US to lift world demand for European exports.
The bank believes euro zone growth will be back to "very close" if not equal to its long-term trend rate of 2.0-2.50 per cent by the fourth quarter of next year.