PARIS (MNI) – Market analysts who listened to today’s press
conference by ECB President Jean-Claude Trichet heard very little in the
way of new guidance on the central bank’s economic outlook or its plans
for future withdrawals of non-standard liquidity measures.

Trichet stated point blank that there was no change in the
Council’s view on either of those topics compared with last month. The
overriding impression is one of an ECB that is undecided (ie, divided),
on hold and buying time.

Excerpts from analysts’ comments are below:

ULRICH WORTBERG, Helaba: Nothing has changed compared to the
previous months. At the moment the ECB is giving no signals that it
might consider additional quantitative measures. I think the ECB will
further wait and only react if the settings change again. This means
that the upward trend of the euro will not reverse for the moment, given
that other central banks are more active than the ECB and might possibly
loosen their monetary policy further.

PHILLIP SHAW, Investec: Very few changes to the ECB’s assessment in
September. A bit more interesting on liquidity policy. Trichet was
hinting at differences in the Governing Council as to when to begin to
unwind the enhanced credit support measures. But the council would have
to monitor the situation very closely. So not giving any clues away but
really still saying that there is a consensus that the measures were
still necessary for now…It was interesting that Trichet began to talk
about the unhelpfulness of exchange rate volatility, but if you were
looking for code words is was noticeable that he didn’t use the word
“brutal movements” as he did a couple of years ago. It may well be that
the Council is a little bit concerned about the sudden rise of the euro
but not overly worried.

JENNIFER MCKEON, Capital Economics: I guess he still sounds
relatively supportive, which is encouraging. It sounds like their
unlimited three-month loans to commercial banks are going to go on for
quite a while, which is a good thing for the region’s periphery, whose
banks are very reliant on those funds. He’s also raised the possibility
of further peripheral government bond purchases which might well be
needed. But he didn’t take any opportunity to suggest that either of
those measures, the bond purchases in particular, would be
stepped-up…So on the one hand they’re going to continue with what
they’re doing and that’s good. But on the other, it seems very unlikely
that they’re going to do any more, and that leaves the ECB lagging
behind other central banks.”

KENNETH WATTRET, BNP Paribas: It was a non-event really, wasn’t it?
On the macroeconomic assessment it was very similar to last time, which
is no big surprise, just a month after the staff projections were
updated. Just a few tweaks here and there, some things removed from the
statement like reference to uncertainty about developments in other
advanced economies, references to low domestic price pressures. With
regard to the normalisation issue? I think we’re pretty much as we were
in September. The message was that the exit strategy continues but that
the ECB will continue with full allotments until the end of the year. We
didn’t really hear anything different to that today. There’s an obvious
difference of opinion on the governing council on the way forward.

ELSA LIGNOS, Royal Bank of Canada: Overall, many of the phrases
that he used were similar to the last month. There was a slight positive
tone when talking about the momentum of the recovery…With respect to
the currency, the message was very clear: excessive volatility and
disorderly moves have adverse effects on economic and financial
stability. He did not mention whether or not the ECB thinks the current
moves are excessive or disorderly. We don’t think that, at present
levels, the ECB is close to mentioning the currency in the opening
statement. Although, having said that, they are very likely to bring it
up at the meetings this weekend. And, it’s likely to be something on
their agenda, even if it doesn’t make it into their prepared statement.

CARSTEN BRZESKI, ING: The ECB kept interest rates unchanged and
seems to be comfortable with its current wait-and-see stance. However,
the press conference brought some interesting subtle changes to the
ECB’s macro assessment, which in the future could pave the road for a
more active normalisation of monetary policy. At first glance, the ECB’s
assessment of the Eurozone economy looked like a verbatim copy of last
month’s press conference. In sum, the ECB sees a gradual sub-potential
recovery without real risks to price stability. However, under the
surface of the well-known story, several important changes had been
hidden between the lines: in our view the ECB has taken a clear U-turn
on the drivers of the Eurozone recovery. Last month, labour market
prospects were still a dampening factor for the outlook. Today, the ECB
said “private sector domestic demand should gradually strengthen
further.” Moreover, the phrase “low domestic price pressures” was
dropped as a factor that keeps price developments moderate. For the
rest, there was hardly any news and there were no signs at all that the
ECB would follow other major central banks with their recent stimulus
measures…With its current wait-and-see-stance, the ECB is clearly
buying time.

THOMAS AMEND, HSBC Trinkaus: It was interesting that Trichet this
time explicitly pointed out that the topic of flexible foreign exchange
rates is discussed in all main international bodies. I found it quite
interesting that even the ECB is not without worries on the rise of the
euro against the dollar. The other main point was that Trichet said that
the extraordinary measures won’t automatically end at the end of the
year. This is a hint that the full allotment mode might be necessary
beyond the end of the year.

CEDRIC THELLIER, Natixis: Trichet explicitly said there had been no
change in non-standard measures, in contrast to what the Fed or the BoJ
could do. The gradual exit is continuing, which is likely to support the
euro. In this regard, he repeated that abrupt forex moves are bad for
the economy and financial stability. Asked about a possible accord with
other central banks in Washington for concerted action to support the
dollar or dampen pressure on the euro, Trichet said that even if it were
true, he would not say so. It was as if he was advising the media not to
exaggerate things…Trichet was clear that the crisis is not over and
that the road to recovery remains rocky. Even if this is not ‘bad news,’
the markets may interpret it as such and let the euro slip. One must not
extrapolate marked short-term trends.

JUERGEN MICHELS, Citigroup: By saying that they will discuss FX at
the upcoming IMF meetings, Mr. Trichet signaled that he is not
particularly happy about the recent euro strengthening…Today’s press
conference confirmed that the ECB will keep the keep interest rate
unchanged for a long period, probably until 3Q 2011. However, with Mr.
Trichet’s more upbeat interpretation of the situation in money markets,
and his downplaying of the euro appreciation, we expect the ECB to
decide in December not to extend the full allotment of the 3M LTRO.”

JOERG KRAEMER, Commerzbank: At today’s press conference of the ECB,
President Trichet confirmed the impression that, unlike the Fed, the ECB
will probably not relax its already very accommodative monetary policy
any further. The Fed-driven dollar weakness should continue to be
reflected, above all, in euro strength.

SILVIO PERUZZO, Royal Bank of Scotland: This was pretty much our
expectation. It is an ECB which is fully moving on with the exit
strategy. From our view, they underestimated the downside risk to the
economic upturn which could surface to the end of the year.

JULIAN CALLOW, Barclays: Following its decision, as expected, to
keep the official interest rates unchanged, today’s ECB press conference
suggests that the Governing Council is not envisaging any near-term
changes to its policy, despite the recent 6% surge in the trade-weighted
euro, nor despite the widespread expectation that the FOMC will launch a
renewed bond buying programme at its early November meeting. Indeed, the
ECB removed from the opening paragraph of its statement a reference to
the inflation outlook as “benefiting from low domestic price pressures.”

CHRISTEL ARANDA HASSEL, Credit Suisse: I thought it was a
non-event. They didn’t say anything that I did not anticipate. There are
two questions that are on everybody’s mind, the strengthening of the
euro and he always says exactly the same: excess volatility, abrupt
changes are not welcome, that’s all they say about it. In terms of the
money-market rates, which have obviously been driven up, the excess
liquidity is diminishing again, in July he said exactly the same.

[TOPICS: M$$EC$,M$X$$$,MT$$$$,MGX$$$,M$$CR$]