AP: ECB Bonello: Interest Rates Appropriate; No Pressure To Hike
VALETTA, Malta (MNI) - The European Central Bank's official interest rates are "appropriate" and given moderate growth and well-anchored inflation expectations, there is no pressure to change them, ECB Governing Council member Michael Bonello said Monday.
However, "the ECB will always be alert to change the rates if need be," Bonello said.
The central bank of Malta, which Bonello heads, put out a statement that said, "going forward the pace of recovery already stands to be limited by the ongoing process of balance sheet adjustment by financial institutions and households." In that context, it noted the latest ECB projections, "which point to a sluggish growth rate of 0.8% for the euro area in 2010."
Bonello observed that inflation was expected at 1.1% this year and 1.5% in 2011, well within the ECB's price stability limit of close to but below 2%. He noted that unemployment was expected to rise to nearly 11%.
The EMU economy is "still below its growth potential" and is unlikely to return to pre-crisis growth rates without structural reforms in the individual Eurozone economies, Bonello said.
With regard to Greece, he said the debt crisis there shows "the wisdom of the rules" enshrined in the EU's Stability and Growth Pact. "We are seeing what happens when those rules are not implemented," he said.
