Central bankers from major countries gathered on Monday to discuss whether the sluggish world economy was finally starting to respond to stimulus from record-low interest rates.
On the eve of the meeting at the Bank for International Settlements, a senior European Central Bank official said euro zone interest rates had fallen far enough to support a rebound that was expected by year's end.
"We have stability of interest rates at a very low level. It is not a time to speculate about a new cut in interest rates. It is time to invest," ECB Governing Council Member Guy Quaden told reporters in Basel late on Sunday.
"The economic activity was weak in the euro zone in the second quarter, but also in the euro zone the prospects for the economy in the coming months are better," he said.
Quaden is a voting member of the ECB's policy setting council and also governor of the central bank of Belgium. The ECB on Thursday held interest rates steady at record lows of 2.0 percent and indicated they would stay there for some time.
"The probability that the economy recovers in the euro zone before the end of the year -- a probability is still just that, a probability -- has improved," Quaden said. "The risks are more balanced, but there are still risks."
Growth stagnated in the second quarter in the 12-nation bloc but the central bank expects recovery by year-end and to accelerate into 2004.
Quaden's colleagues from central banks in the Group of 10 (G10) and other top industrialized nations did not comment as they arrived for the meeting.
ECB President-designate Jean-Claude Trichet, the new chairman of G10 central bankers, is scheduled to hold a news conference around 1030 GMT.
Central bankers have become more upbeat than three months ago when the annual report from the BIS, which acts as global banker for central banks, said that world growth was stalled with no evidence of a robust expansion building.
Financial markets, however, are displaying confidence that three years of bruising losses are over and recovery is taking firm hold.
The Standard and Poor's 500 Index .SPX has gained 27 percent since early March on improving corporate and economic news. The FTSE 100 .FTSE , buoyed by signs that both Japan and the U.S. are rebounding, is up 29.5 percent from its March trough.
Bond yields in the United States and Europe likewise have shot higher on recovery hopes.
Yet growth is tentative. Corporations have been preoccupied with repairing their balance sheets, damaged by the huge amounts of debt they took on during the technology boom years.
New investment remains scant, placing recovery firmly on the shoulders of consumers, some heavily indebted and flagging as unemployment and interest rates rise.
Oil prices also have been rising, not helped by instability in the Middle East and Iraq, which is hindering confidence.
In addition, the euro zone is a worrisome laggard and very much dependent on an uncertain U.S. expansion, which so far has relied heavily on a massive fiscal stimulus.
Grim employment data for August, when U.S. non-farm payrolls shrank by 93,000 for the seven straight month of job losses, spread pessimism about the sustainability of its recovery.