Speaking at the central bank's monthly news conference, Duisenberg said the economy remains at risk from events abroad but that a series of indicators ranging from consumer confidence to capacity utilisation were improving.

"In the euro area, available indicators continue to suggest a mixed picture," Duisenberg said.

"The governing council (of the ECB) emphasised that further thorough analysis and very close monitoring of underlying trends are needed before any conclusions can be drawn concerning the broad outlook for 1999 and 2000.

As expected, the ECB left its securities refinancing rate at 3.0 per cent, the level that has prevailed since the euro was launched on January 4.

The news conference, which lasted only slightly more than half an hour, shed little light on ECB's policies but illustrated problems the central bank faces in evaluating the economy and what indicators are being tracked.

Duisenberg said that in addition to worrying events abroad such as the financial crisis in Brazil, economic activity appeared to have slowed down in recent months, especially in industrial production until November last year.

More optimistically, however, a broad range of indicators including car sales, order books and unemployment all recently showed signs of improvement.

"With regard to the cyclical situation, recent data seem to confirm our earlier assessment that there are down size risks for output growth and that production may have slowed down around the turn of the year."

But he added, "in the opinion of the governing council, there are also no clear signals as yet of a stronger than expected weakening in output growth."

Duisenberg was equally guarded about the European price outlook, saying "the pattern of risks to price stability has remained broadly unchanged."

He did note, however, that the narrow aggregate M1 money supply had been more buoyant recently and that growth of credit to the private sector continued to be high in December.

"Although they are not considered by the governing council to imply inflationary risks at this juncture, in particular the developments in credit growth will need to be carefully monitored in coming months," he said.

According to the most recent ECB data, the three-month moving average of annual M3 growth rates was 4.7 per cent, unchanged from the month before and close to the reference value for broad money growth of 4.5 per cent the ECB has said it favours.

Duisenberg also said the ECB was closely watching the euro which has slipped steadily against the dollar recently, admitting the central bank was "puzzled" about the decline.

But he added he was not worried about the decline and that intervention was not yet something the bank was considering.