FRANKFURT (MNI) – The following is the first part of a verbatim
text of the opening statement by European Central Bank President
Jean-Claude Trichet at his press conference following today’s monthly
monetary policy meeting of the ECB’s Governing Council.

The text was published on the ECB website:

Ladies and gentlemen, the Vice-President and I are very pleased to
welcome you to our press conference. We will now report on the outcome
of todays meeting.

Based on its regular economic and monetary analyses, the Governing
Council continues to view the current key ECB interest rates as
appropriate. It therefore decided to leave them unchanged. Considering
all the new information and analyses which have become available since
our meeting on 2 September 2010, we continue to expect price
developments to remain moderate over the policy-relevant medium-term
horizon. Recent economic data are consistent with our expectation that
the recovery should proceed at a moderate pace in the second half of
this year, with the underlying momentum remaining positive. At the same
time, uncertainty is still prevailing. Our monetary analysis confirms
that inflationary pressures over the medium term remain contained, as
suggested by weak money and credit growth. We expect price stability to
be maintained over the medium term, thereby supporting the purchasing
power of euro area households. Inflation expectations remain firmly
anchored in line with our aim of keeping inflation rates below, but
close to, 2% over the medium term. The firm anchoring of inflation
expectations remains of the essence.

Overall, the current monetary policy stance remains accommodative.
The stance, the provision of liquidity and the allotment modes will be
adjusted as appropriate, taking into account the fact that all the
non-standard measures taken during the period of acute financial market
tensions are fully consistent with our mandate and, by construction,
temporary in nature. Accordingly, the Governing Council will continue to
monitor all developments over the period ahead very closely.

Let me now explain our assessment in greater detail, starting with
the economic analysis. Euro area real GDP grew strongly on a quarterly
basis, increasing by 1.0% in the second quarter of 2010, supported
mainly by domestic demand, but partly reflecting temporary factors.
Recent statistical releases and survey evidence generally confirm our
expectation of a moderation in the second half of this year in the euro
area and elsewhere. Nevertheless, the positive underlying momentum of
the recovery in the euro area remains in place. The global recovery is
expected to go on, and this should imply a continued positive impact on
the demand for euro area exports. At the same time, private sector
domestic demand should gradually strengthen further, supported by the
accommodative monetary policy stance and the measures adopted to restore
the functioning of the financial system. However, the recovery in
activity is expected to be dampened by the process of balance sheet
adjustment in various sectors.

In the Governing Councils assessment, the risks to this economic
outlook are slightly tilted to the downside, with uncertainty still
prevailing. On the one hand, global trade may continue to grow more
rapidly than expected, thereby supporting euro area exports. On the
other hand, concerns remain relating to the emergence of renewed
tensions in financial markets. In addition, downside risks relate to
renewed increases in oil and other commodity prices, and protectionist
pressures, as well as the possibility of a disorderly correction of
global imbalances.

With regard to price developments, euro area annual HICP inflation
was 1.8% in September, according to Eurostats flash estimate, compared
with 1.6% in August. The increase in inflation was anticipated and
reflects base effects mainly stemming from the energy component. In the
next few months HICP inflation rates will hover around current levels
before moderating again in the course of next year. Overall, in 2011
inflation rates should remain moderate, benefiting from low domestic
price pressures. Inflation expectations over the medium to longer term
continue to be firmly anchored in line with the Governing Councils aim
of keeping inflation rates below, but close to, 2% over the medium term.

Risks to the outlook for price developments are slightly tilted to
the upside. They relate, in particular, to the evolution of energy and
non-oil commodity prices. Furthermore, increases in indirect taxation
and administered prices may be greater than currently expected, owing to
the need for fiscal consolidation in the coming years. At the same time,
risks to domestic price and cost developments are contained.

Turning to the monetary analysis, the annual growth rate of M3 rose
to 1.1% in August 2010, from 0.2% in July. The annual growth rate of
loans to the private sector also rose, standing at 1.2%, after 0.8% in
the previous month. In both cases, the rise reflects relatively strong
monthly flows. The still low growth rates continue to support the
assessment that the underlying pace of monetary expansion is moderate
and that inflationary pressures over the medium term are contained.

The yield curve has remained fairly steep, but the downward impact
of this on monetary growth is gradually waning. Moreover, while spreads
between different short-term interest rates are still generally narrow,
they have been widening somewhat between rates paid on short-term time
deposits and overnight deposits. As a result, the annual growth rate of
M1 has continued to moderate from high levels, and stood at 7.7% in
August 2010, while the annual growth rate of other short-term deposits
has become less negative.

The rise in the annual growth rate of bank loans to the
non-financial private sector reflects both a further slight increase in
the positive growth of loans to households and a gradually less negative
annual growth rate in loans to non-financial corporations. The latest
developments are consistent with the lagged response of loan
developments to economic activity over the business cycle that was also
observed in past cycles.

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