FRANKFURT (MNI) – Policymakers must closely monitor credit growth
because it can serve as a leading indicator of emerging economic
imbalances, European Central Bank President Jean-Claude Trichet said

“Too rapid overall credit growth should always be a warning signal
for central banks in all advanced and emerging economies,” Trichet said
in a speech text prepared for delivery at a central banking conference
in Moscow.

“Responding to monetary and credit dynamics within the scope of a
comprehensive assessment of the risks to price stability in the medium
term implies that interest rate decisions will tend to ‘lean against’
accumulating financial imbalances and asset price misalignments,”
Trichet said.

He called for a “further development” of monetary indicators to
help “support financial and macroeconomic stability, within an overall
strategy focused on the attainment of our primary objective of
safeguarding price stability.”

Trichet assured that the ECB remains “inflexibly attached” to
ensuring price stability, and he rejected criticism of its bond
purchasing program.

“We have not gone beyond the goal of re-establishing the proper
transmission of our monetary policy. We have not changed our monetary
policy stance: we have maintained the current level of interest rates, a
level that is, in our view, appropriate, and we have not moved towards
more ample liquidity conditions,” Trichet said.

“It is precisely to guarantee that the monetary policy stance
remains unaffected that we are sterilising our interventions. This
confirms and underpins our commitment to maintaining price stability,
the objective,” he added.

He also dismissed criticism that the central bank may be monetizing
fiscal deficits with bond program, arguing that “bond purchases made on
the secondary market cannot be used to circumvent the fundamental
principle of budgetary discipline.”

–Frankfurt newsroom, +49-69-720-142;

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