Rate cuts ‘not way to boost economy’

EUROPEAN Central Bank president Wim Duisenberg said the key to boosting the pace of economic recovery lies in boosting consumer and business confidence, and it is not interest rate cuts that will do this.

“The main problem which plagues both the euro area, and the American economy also, is not the level of interest rates, it’s the lack of confidence and the great deal of uncertainty prevailing in all these economies,” he told the European Parliament economic and monetary affairs committee.

He noted that US Treasury Secretary Paul O’Neill had said that companies take investment decisions based on expectations of the rates of return and on economic confidence, and not based on the level of interest rates.