He let Papademos go out and take the bullet for him over the weekend, but now ECB President Trichet is speaking out. He says it is clear there has been significant deterioration in the economy and in the present circumstances it is more important than ever to anchor inflation expectations. (He better mean that he needs to anchor expectations that there will be inflation rather than deflation). He specifically says he does not see deflation as a current threat. This from the man two weeks ago who wanted to hold rates steady amid the fastest inflation decline in modern times.
Staff projections put GDP at between zero and minus 1% in 2009, he says in a magazine interview. That is probably undershooting the mark, in my opinion. Manufacturing is in the dumps and exports are hurting. Tourism will be heavily affected this year. I’d bet on the under.
