UPDATE: ECB Trichet: Upward Risks To Price Stability Prevail
Thu, Oct 4 2007, 13:41 GMT
http://www.djnewswires.com/eu
UPDATE: ECB Trichet: Upward Risks To Price Stability Prevail
(Updates with further comments from the introductory statement and the press conference.)
FRANKFURT (Dow Jones)--European Central Bank President Jean-Claude Trichet said Thursday that upward risks to price stability remain over the medium term, while money and credit growth remain vigorous.
He also said the ECB appreciates comments from the U.S. saying a strong dollar is important and favorable for the country's economy.
Speaking at a news conference after the ECB's rate-setting meeting, Trichet also said the ECB was monitoring price risks "very closely," and would act in a "firm and timely manner" on inflation risks.
"To sum up, a cross-check of the information...has confirmed the existence of upside risks to price stability over the medium term, against the background of good economic fundamentals in the euro area," Trichet said in the introductory statement after the central bank's meeting in Vienna. "Accordingly, and with money and credit growth vigorous in the euro area, our monetary policy stands ready to counter upside risks to price stability, as required by our primary objective."
The ECB left all its policy rates unchanged, as expected, with the main refinancing minimum bid rate at 4.00%.
This was in line with the market's expectations, as 53 economists surveyed by Dow Jones Newswires unanimously expected the ECB to keep its key policy rate unchanged.
Trichet said it was necessary to gather new data for policy conclusions.
Pointing out that heightened uncertainty was the baseline scenario, Trichet said the ECB was paying "great attention" to financial market developments and "particular caution" was needed, given financial market conditions.
"Consequently, the Governing Council will monitor very closely all developments," Trichet said. "On the basis of our assessment, and by acting in a firm and timely manner, we will ensure that risks to price stability over the medium term don't materialize and that medium and long-term inflation expectations remain firmly anchored in line with price stability, which is all the more important in the current context."
In September, inflation for the first time in more than a year rose above the ECB's definition of price stability. Driven by higher energy and food prices, the inflation rate surged to 2.1% in September from 1.7% in August.
Trichet said the euro zone's inflation will remain above 2.0% through early 2008 and likely be around 2% on average in 2008.
Trichet confirmed that economic growth in the euro zone would continue in the third and fourth quarters of the year, with confidence indicators still above historic levels. As for 2008, economic outlook for growth was around potential.
Answering reporters' questions about exchange rates, Trichet said the euro's exchange rate is a parameter for monetary policy and verbal discipline on this issue is "very important."
"I have already qualified what I can say about the dollar, the yen and the yuan and I stick to what I have said, which has a meaning," Trichet said.
"When I say that we appreciate what the (U.S.) Secretary of the Treasury and our colleagues in the U.S. say on the strong dollar being important and favorable to the U.S. economy it means something," Trichet said.
The euro set a record high of above $1.42 earlier this week, a level that has added to concern. The new record was partly a result of narrowing interest rate differential between the euro zone and the U.S.
Monday, Trichet said the ECB is paying "extreme attention" to remarks by U.S. officials that a strong dollar is good for the U.S.
"As you know on the yen I have already mentioned the fact that the markets should progressively take into account the better fundamentals in the Japanese economy," Trichet said at the press conference Thursday.
Turning to all currencies, including those in emerging markets in Asia, Trichet said "the fact that more flexibility would be in both their interests and in the interests of the global economy is something that is in our own message."
European Central Bank Web site:
http://www.ecb.int
