ECB continues cautious approach to interest rates

The European Central Bank (ECB) is in no hurry to ease monetary policy further despite inflation forecasts remaining below its official 2% target. Merrill Lynch global asset allocation strategist César Molinas says the ECB's projections released in June show a mid-range inflation forecast for 2004 of 1.3%. However, the bank is not expected to react to the numbers as quickly as other inflation-targeting policymakers. 'We believe the ECB is likely to react to inflation forecasts being substantially below 2% with the same flexibility it has reacted in the past to inflation being substanti...