FRANKFURT (MNI) – Neither inflation nor deflation risks are likely
to materialize in the Eurozone, European Central Bank President
Jean-Claude Trichet told the Financial Times in an interview
pre-released Thursday.

The mood at present in regard to the United States economy is
overly negative, said Trichet, who told the paper the ECB will gradually
phase out its non-standard measures as markets stabilize.

“I do not see the materialisation of a risk of deflation, or either
of inflation, at present. We went through the heat of the crisis without
any materialisation of deflationary risks,” Trichet explained.

“Our successful and solid anchoring of inflation expectations has
protected us, I trust, very well against the materialisation of
inflation risks — but also against the materialisation of deflation
risks,” he elaborated.

“As markets gradually stabilise, our non-standard measures, which
are fully consistent with our mandate and, by construction, temporary in
nature, will continue to be progressively phased out. We are
accompanying the market as it progressively get back to normal. But, as
I said, it is a process which takes time,” he said.

Turning to the US economy, Trichet praised the Federal Reserve for
its “wise and pertinent” analysis throughout the crisis.

“There was a level of hype at certain moments, when we were getting
out of the crisis, which perhaps did not fully reflect the situation of
the real economy.”

“And now there is a mood which seems to me too negative. Thats my
own personal feeling.”

Trichet expressed complete confidence that the single currency will
survive, “Yes, I am confident, of course!”

Trichet said that Europe should have conducted bank stress tests
earlier, noting that “the ECB and the Bank of England were very much in
favour of this stress test.”

“You know that we particularly welcomed the detailed publication of
the results for the 91 banks involved,” Trichet said in what appeared to
be an attempt to mute recent market concerns over the credibility of
those tests.

On Tuesday, a report in The Wall Street Journal published a report
saying that stress tests had indeed not been detailed enough and
underestimated the exposure of some major banks to sovereign debt.

–Frankfurt bureau; +49-69-720142; frankfurt@marketnews.com

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