–Current Rate Stance Appropriate To Deliver Med-Tm Price Stability
–Decision On Non-Standard Steps Independent From Rate Judgement
–Rate Decision Taken Unanimously; No Comment On Market Rates
–All Global Econ Data Seen – Hard And Soft – Better Than Expected
–Data Continues To Confirm Momemtum Of Recovery In Place

LONDON (MNI) – Euro zone inflation rates could temporarily increase
further but will achieve stability again at the end of 2011,
European Central Bank President Jean-Claude Trichet said today.

At the press conference following the ECB monthly governing
council meeting, Trichet said:

“We consider that inflation rates could temporarily increase
further” – adding – “going back to price stability by the end of the
year”

“We consider our inflation expectations to be firmly anchored,”
Trichet continued.

“We are permanently alert. We are never pre-committed not to move
interest rates”

“We have now 12 years of the euro. The average yearly inflation
over 12 years in the euro area is 1.97%”

“This is something that is remarkable in terms of track record,” he
added.

The ECB chief said that virtually all economic data seen so far had
come in better than expected:

“For the global economy as a whole , for us I must confess that
practically all real data and hard data … and facts and figures that
we have observed since the start of the recovery – it was the first
quarter of 2009 …. all we have seen was better than expected,
practically”.

He continued: “You have to correct, perhaps, here and there there
was perhaps a slight disappointment…I don’t want to mention any
particular economy in Europe but it is obvious that some of the
economies are behaving very properly.”

“If I take … the PMI surveys and the EC surveys for the
industrial sector, we have seen that they were increasing and I have
said that the hard data would confirm the soft data … Industrial
production was quite improved.”

Recent data “have confirmed that the recovery is there and
continues to see its momentum confirmed,” Trichet said.

Trichet reiterated that the ECB would do all that was needed to
deliver price stability:

“As regards our monetary policy it is absolutely crystal clear we
always do what is necessary to deliver price stability.”

Trichet said that today’s decision to leave rates unchanged had
been taken unanimously by the Council but refused to respond to
questions on whether market rates currently provide a reliable barometer
of the outlook for rates.

“We took the decision unanimously,” Trichet said.

Stressing that the council considered current official interest
rates to be appropriate, Trichet said that the decision on when to
remove non-standard monetary measures would be taken independently of
decisions on rates:

“We have a monetary policy stance … fixed on the delivery of
price stability. We have our non-standard measures – SMP, full allotment
– those measures are there to permit to monetary policy transmission to
be as good as possible. We are really taking the decision on the
non-standard measures totally independently of the decision taken on
interest rates”.

“The two concepts are disconnected,” Trichet said.

Today’s decision by the Council to leave the current policy
settings of the ECB intact would produce price stability over the medium
term, Trichet said:

“Taking into account our economic analysis and our monetary
analysis we consider our present interest rate appropriate to deliver
price stability in the medium term…If we have to change our interest
rate, again we are never pre-committed … and we proved that in the
past by deeds and not by words.”

The ECB’s track record had been key to underpinning the present low
level of inflation expectations:

“This is the reason by the way why our inflation expectations are
very well anchored in comparison with a number of other inflation
expectations the world over”.

“We have a monetary policy stance … fixed on the delivery of
price stability. We have our non-standard measures – SMP, full allotment
– those measures are there to permit to monetary policy transmission to
be as good as possible. We are really taking the decision on the
non-standard measures totally independently of the decision taken on
interest rates.

–London newsroom: 0044-207-862-7492: email: ukeditorial@marketnews.com

[TOPICS: MT$$$$,M$$EC$,M$X$$$]

“These two concepts are disconnected”