–ECB Chief ‘Not Making Any Assumption’ About Any Next QE Step
–ECB Will Do ‘Whatever is Necessary’

By Claudia Hirsch

NEW YORK (MNI) – European Central Bank President Jean-Claude
Trichet Tuesday said the central bank will continue to phase out its
current program of non-standard liquidity measures as scheduled, but the
issue may be revisited in the new year.

“We have confirmed that our interest rates were appropriate, and we
have confirmed that our non-standard measures … would go on … until
the end of the year, then we’ll see what we do afterward,” Trichet said,
answering panelists’ questions following a luncheon address to the
Economic Club of New York.

“We look at everything,” in assessing monetary policy moves, he
said. “If there were anything in the global economy, … any change in
the parameters that come to us, we would judge according to our own
concept.”

The ECB, only after studying all variables, will determine the
exact position to “take or not take,” Trichet said.

“I am not making, at this stage, any assumption,” he said.

“We always say that we will do whatever is necessary,” Trichet
said, and added that the ECB has proven in the past that it can take
“spectacular” steps.

The Bank of Japan announced last week it is considering another
round of so-called quantitative easing, by creating a Y5 trillion
asset-purchase plan, while according to the minutes from the Federal
Open Market Committee’s last meeting — published Tuesday — the U.S.
Federal Reserve is prepared to do the same, if necessary. The ECB’s
demurral on any next liquidity injection has powered the euro, Europe’s
single currency, to new highs for the year.

In separate remarks Tuesday, ECB Governing Council member Axel
Weber, also in New York, argued that risks from the ECB’s asset purchase
program are outweighing its benefits and the securities purchase should
now be phased out permanently.

The ECB has ended its recession-era program for longer-dated six-
and 12-month loans but still engages in unlimited loans on a weekly,
monthly and three-month basis.

Trichet said that each country’s non-standard liquidity measures
were designed around “the financial structure of the various economies
concerned.” The Fed’s response, large-scale asset purchases, was not
surprising, he said, given that the U.S. economy is financed “perhaps
75% by financial markets.” Likewise, the ECB’s unlimited-lending
response was in line with its economy’s being financed in large part by
banks.

“So you can understand the differences of non-standard measures
taken.”

Trichet went on to say that the ECB’s standard monetary policy
moves are designed to be “credible in the delivery of price stability
over time.” This targets inflation at less than, but close to, 2%, he
said.

“We are credible,” he said.

Trichet also said that Europe’s economy isn’t limber enough.

“If we were more flexible, it would make an enormous difference in
terms of growth potential.”

In his prepared remarks, Trichet addressed Europe’s
macro-prudential oversight plans and economic governance, concluding
that international unity was critical in stemming the global financial
crisis that erupted in late 2008. He also made an apparent reference to
recent exchange rate volatility and competitive currency devaluations,
which have helped vault the euro some 17% vs. the U.S. dollar since
June’s 2010 low.

“What we need today is not ‘wars’ of any kind, but a strong and
renewed commitment to confident and resolute cooperation,” Trichet said
in his speech.

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