ECB says euro zone economic fundamentals remain strong

The European Central Bank said euro zone economic fundamentals remain strong despite the recent turmoil in credit markets.

"Incoming macroeconomic data confirm the strong fundamentals of the euro area economy and support a favourable medium-term outlook for real GDP growth," the ECB said in its September monthly bulletin.

"Data on activity in the third quarter -- from various confidence surveys and indicator-based estimates -- remain favourable overall and support the assessment that real GDP is growing at sustained rates," it said.

Against this background of strong economic fundamentals, inflation risks are still tilted to the upside and interest rates therefore remain "on the accommodative side", it said.

The ECB left its main interest rates unchanged at 4.00 pct at last week's governing council meeting, citing uncertainty about the economic impact of the recent financial market turmoil.

"It is appropriate to gather additional information and to examine new data before drawing further conclusions for monetary policy," it said. But it said it will monitor all economic developments very closely and continue to pay close attention to developments in financial markets.

The ECB said inflation is likely to increase to levels above 2.0 pct in the months ahead from 1.8 pct currently. Strong money and credit growth continue to point to inflation risks over the medium to longer term, it said..