ECB has no cut rate

European Central Bank Governing Council member Klaus Liebscher signaled the bank may leave interest rates at 4% this year.

In an interview in Vienna, he stated that he saw no room for the ECB to reduce interest rates in 2008. He said that the current monetary policy stance is very suitable to maintain price stability and to avoid inflation expectations building up.

The ECB has refrained from following the U.S. Federal Reserve in cutting borrowing costs as soaring food and energy prices drive inflation above 3 percent.

The bank is concerned faster inflation will feed into wage demands and prompt companies to pass on higher costs, leading to so-called second-round effects.

Liebscher said that inflation at 3% was "unacceptable" and that the ECB will do what was needed to prevent second-round inflation effects.

Regarding growth, he stated that growth will be ongoing and that "there's no reason for any kind of growth pessimism. He also stated that there was no need for the ECB to lower its growth forecasts.

Asked if the ECB could raise interest rates, Liebscher said the bank is not ``pre-committed'' and any possible increase would depend on ``new, incoming'' data.