The European Central Bank (ECB) kept its powder dry yesterday, holding interest rates steady at 2.75 per cent, but made clear it might have to use its ammunition soon as risks to eurozone growth mount.
Wim Duisenberg, ECB president, signalled to the markets that the bank had edged close to easing monetary policy, insisting the "pros and cons" of a rate cut had been discussed by the governing council.
But Mr Duisenberg said the ECB had held back from easing, fearing a cut now would have been "drowned" in the "sea of uncertainty" caused by mounting political tension over Iraq.
"At this juncture it is very difficult, if not impossible, to form a conclusive judgment of the impact of geopolitical developments on the world economy . . . and the euro area in particular," he said.
