'ECB rates appropriate, risks unchanged'

The euro area's growth prospects and price stability risks are largely unchanged compared with 10 days ago and interest rates are appropriate, a top European Central Bank (ECB) policymaker said on Sunday. The ECB left its main policy rate unchanged at 2.00 percent at its latest meeting on June 2.
"The level of interest rates is appropriate for attaining our objectives," ECB Vice-President Lucas Papademos said.
"The ECB recently, following the meeting of the Governing Council, presented its assessment of the economic outlook and in particular the outlook for price stability and the associated risks," he told a news conference in Sweden.
"In a general way, this assessment has not changed over the last few days," he said, speaking after an international conference on inflation targeting.
Papademos said the ECB's baseline scenario was for strengthening economic growth in the second half of 2005 and further in 2006, despite some recently observed weaknesses.
"We do anticipate that output growth in the euro area will pick up in the second part of this year and will increase further in the year 2006," he said.
Uncertainties surrounding the ECB's baseline growth scenario were, on balance, on the downside, he said.
The 12-nation euro zone registered gross domestic product growth of 1.3 percent year-on-year in the first quarter of 2005.
"There are no indications of inflationary pressure that is building up, and we expect that over the medium term inflation will decline to a level compatible with price stability," Papademos said, repeating, he said, the ECB's June 2 assessment.
In April, harmonised euro zone inflation was 2.1 percent year-on-year. The ECB defines price stability as inflation rates below but close to 2 percent.
"There are several upside risks to price stability which should be monitored and which warrant continued vigilance," Papademos said, citing "potential further increases in the price of oil" and "possible increases in ... indirect taxes".
"Ample liquidity in the euro area implies that there may be medium and long-term risks to price stability, particularly as the economy recovers," he added.