FRANKFURT (MNI) – The European Central Bank currently assumes that
medium-term price stability is ensured in the Eurozone, Executive Board
member Gertrude Tumpel-Gugerell said Thursday.

According to an ECB-provided text for a dinner speech to be
delivered at an event in Austria, Tumpel-Gugerell observed that
financing conditions are good and inflation expectations in line with
the central bank’s price stability goal.

“We are operating on the assumption that price stability remains
assured in the medium term, as a result of which the purchasing power of
private households in the euro area remains preserved,” she said.

“Inflation expectations continue to be firmly anchored at a level
that is in line with our goal of keeping price increases in the medium
term below but close to 2%,” she continued.

The situation in Eurozone money markets “is gradually improving,”
thus allowing the ECB to desist from some of its liquidity-providing
assistance, Tumpel-Gugerell affirmed.

She noted that volumes in the interbank money market have more than
doubled since last summer to the level prevailing before August 2007.
“This could be interpreted, with the necessary caution, as a positive
sign of greater trust between the banks in the Eurozone, which in turn
has led to an increase in interbank lending,” she said.

“All in all, the financing conditions in the Eurozone remain quite
favorable,” she said.

Improvement is also seen in household income and corporate results,
developments “supporting the positive prospects for growth in the euro
area, even against the backdrop of further budget consolidation efforts
of governments,” she said.

Growth in the area continued in the last quarter, Tumpel-Gugerell
suggested, citing PMIs and European Commission surveys

Moreover, the increase of consumer confidence in 4Q to above its
long-term average “points to a gradual recovery of consumption in the
euro area,” she said.

Retail sales probably helped boost 2010 GDP, she said. Although the
ECB suspects declining sales of new passenger cars likely hurt growth
following the expiry of the scrapping bonus, the other components — and
in particular services — were likely positive, she reasoned.

–Frankfurt bureau tel.: +49-69-720142. Email: dbarwick@marketnews.com

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