PARIS (MNI) – The European Central Bank is keeping a very close eye
on commodity price developments in order to ensure that second-round
inflation effects don’t creep into the broader Eurozone economy, ECB
President Jean-Claude Trichet said Saturday.

Speaking to reporters following the two-day meeting of G20 finance
ministers and central bankers here, Trichet was asked if he feared that
the ongoing political turmoil in numerous Arab countries could produce
upward inflation pressure because of its potential impact on oil prices.

He declined to comment specifically on the recent events, noting
that geopolitics was not the ECB’s domain. But he added that “the prices
of commodities, of energy and oil, is something we are looking at very,
very, very carefully with a view to avoid second-round effects.”

“‘No second-round effects’ is our motto,” he said.

Trichet also summarized what he had told other participants at the
G-20 meeting about the state of the Eurozone economy:

“As far as we are concerned at the ECB, we were seeing a
confirmation of the recovery we had seen since the second part of 2009,
but we were not claiming victory,” Trichet said.

He said he also told other G20 conferees that inflation pressures
emanating from oil and other commodity prices “were to be taken
seriously, and that was a matter for a very interesting exchange of
views.”

With regard to the ECB’s own policy, Trichet said he told his G20
colleagues that “we were making a strict difference between monetary
policy and interest rates — the so-called standard measures — on one
hand, and the non-standard measures [on the other hand] that had to be
commensurate with the destabilization in markets that we were
observing.”

He also repeated to his counterparts the ECB’s current official
line that “there was a balance between risks for price stability in the
medium run, but we did not exclude that in the future this balance could
become unbalanced on the upside.”

Speaking moments earlier at another post-G20 press conference,
outgoing Bundesbank President Axel Weber, also a member of the ECB’s
Governing Council, went beyond the ECB’s official view, telling
reporters that EMU inflation risks were already on the upside.

–Paris Newsroom, +331-42-71-55-40; bwolfson@marketnews.com

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