–Originally transmitted on Tuesday at 12:11 ET

FRANKFURT (MNI) – The European Central Bank has not used and will
not use monetary policy to redress governments’ mistakes, ECB President
Jean-Claude Trichet said in an interview with German daily Frankfurter
Allgemeine Zeitung released Tuesday.

In one of his final interviews as ECB President, Trichet launched a
passionate defense of the central bank’s crisis-fighting measures that
have exposed it to much criticism, particularly in Germany.

“The most important thing for the ECB is to ensure medium- and
long-term stability, and that is why it cannot use monetary policy to
put right the failings of government policies,” Trichet told the paper.

Trichet rejected suggestions that the ECB may have politicized its
role during the crisis and overstepped the limits of its mandate with
unconventional support measures.

“We are not politicizing our role. We are executing our monetary
policy responsibly in accordance with the Treaty, fully in line with the
European tradition as regards our call for sound fiscal policies,”
Trichet said.

All non-standard measures the central bank employs are aimed at
restoring the monetary policy transmission mechanism, Trichet stressed.

“We are entitled to use all of the instruments mentioned… We had
to intervene — for monetary reasons — only because for a long time
governments did not take their responsibility for ensuring financial
stability seriously,” Trichet said.

And any comparison “with other important advanced economies’
central banks shows that we are actually very prudent in our application
of non-standard measures,” Trichet pointed out.

He reiterated that at the same time, the ECB pursues a strict
“separation principle” between its non-standard measure and monetary
policy.

“Have we perhaps gone too far as regards our monetary policy? To
answer that, we should look at the policy rates of other currency areas,
such as Japan or the United States, which are much lower than ours,”
Trichet said.

Trichet pointed out that the ECB not only enjoys a strong price
stability track record, but has also managed to anchor inflation
expectations going forward.

“What matters is the fact that today we have price stability in the
medium term and inflation expectations are firmly anchored,” Trichet
said.

“The information that we obtain from investors and savers indicates
that [the euro] will ensure price stability in line with our definition:
less than 2%, but close to 2%. The average annual inflation rate six to
ten years from now is expected to be 1.8%,” he added.

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

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