LONDON (MNI) – The rise in EONIA is not an issue of concern for the
European Central Bank but rather is a sign that the interbank liquidity
situation is normalising, European Central Bank President Jean-Claude
Trichet said today.

Speaking at a press conference following the ECB’s monthly
Governing Council meeting, Trichet said the rise in short-term market
interest rates, due to a lower volume of outstanding liquidity in the
banking system, is not a signal of the central bank’s intentions on
official interest rates.

He also said the bank stress tests published late last month were
“impressive” and that they showed the resilience of the European banking
system.

“We are very happy that the stress tests have been a success. That
being said, it is clear that…because of the less dynamic [bank] demand
for the liquidity, we are in the situation [in which] it is normal to
view some augmentation of EONIA,” the ECB chief said. “So, we see that
as part of a situation that is normalizing.”

However, he made clear the increase was not engineered by the ECB,
and suggested the central bank was neutral about it.

“No, I don’t welcome it,” Trichet said. With regard to the bank’s
monetary policy, he said: “I don’t comment on future rates. We consider
the present monetary rate as appropriate. We have no signalling of rates
as I am speaking.”

Trichet also said the market is “functioning a little bit better,”
noting that money market volume had more than doubled. “It is not a
normal situation yet. But it goes in a good direction,” he said.

“As for the future decisions, the rendezvous is for the next
meeting. We will take all decisions as appropriate,” Trichet said.

–London newsroom: 0044-207-634-1624: email: dthomas@marketnews.com

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