The European Central Bank remains focused on its main aim of price stability, policymakers said on Monday, even though fresh fears of a worldwide credit crisis hammered financial markets.
Analysts said it appeared to be business as usual at the ECB, which unlike its U.S. and British counterparts has refrained from giving any emergency liquidity help for banks in recent days.
ECB policymakers stuck to the script which has accompanied their nine-month freeze of key interest rates, indicating little chance of a speedy cut from the current 4.0 percent level.
"Price stability is the best contribution monetary policy can make to structural reforms in Europe," ECB Executive Board member Juergen Stark told a conference in Paris.
In Vienna, Governing Council member Klaus Liebscher said it was important to avoid a wage-price spiral against a backdrop of "moderating, but ongoing economic growth" in the euro zone and stressed that the ECB acted independently.
"Each central bank, whether it is the Fed or the ECB ... has to do what is in their own interest and are the necessities in their own currencies," Liebscher said.
However, Liebscher repeated the ECB's concern about sharp movements on currency markets.
These intensified on Monday as the dollar fell to a new record low against the euro and a 12-1/2 year low against the Japanese yen.
"I am concerned about the development ... and about the excess volatility, which we see now in the markets and everything with that respect has to be avoided. There is a common responsibility," Liebscher said.
Asked about the prospect of ECB intervention on currency markets, Liebscher said this was never signalled in advance, only afterwards.
Analysts said his comments and the ECB's lack of action suggested it was not planning to follow other major central banks in loosening interest rates, but did not rule out adding extra funds to money markets as it has done since last August.
"(Cutting rates) would run counter to the ECB's vigorous separation of its monetary policy from its money market operations," Barclays Capital economist Julian Callow said.
By 3:00 p.m. London time, the ECB had made no announcement on currency or money markets and had also made no comment on a cut to the U.S. Federal Reserve discount lending rate and the Bank of England's offer of 5 billion pounds ($9.85 billion) of three-day funds.
These followed a fire sale of U.S. investment bank Bear Stearns, which increased banks' concerns about exposure of trading partners to credit risk.
Euro zone overnight market rates crept up early on Monday but by 3:00 p.m. London time the bid/ask spread was back to 3.96/4.04 percent, roughly in line with the ECB's benchmark, according to Reuters data.
One-week and three-month benchmark Euribor interbank lending rates were at their highest levels since early January but well below those seen last December.
Analysts said the ECB, unlike the U.S. Federal Reserve, had no need to alter its liquidity arsenal but would not hesitate to jump in with extra cash if needed.
"It's business as usual ... because we don't have the same kind of issues with our money market operations," Morgan Stanley economist Elga Bartsch said. "The ECB has a very broad set-up ... and therefore I think if they had felt that there are serious money market tensions in the euro area today they would probably have come in with a tender."
Bank of America economist Holger Schmieding said Liebscher's comment on currency market intervention kept the door open for a possible concerted action.
"But it is not strong enough a signal to say that they are considering that," he said. "If the U.S. dollar continues to fall, the ECB will step up rhetoric and there is a chance it would discuss an intervention with the Fed," he added.