–Adds Comments On Liquidity For The Banking Sector

FRANKFURT (MNI) – Risks for Eurozone economic growth are now seen
tilted to the downside, while inflation risks are no longer to the
upside but balanced, European Central Bank President Jean-Claude Trichet
said Thursday.

“Today we see that there is a downside risk to growth,” Trichet
told reporters after the ECB’s Governing Council unanimously decided to
leave key interest rates on hold, as expected.

The downward shift in growth risks is “significant,” Trichet said,
when asked about the outlook for monetary policy going forward.

“If I compare today with what we had said a month a go, I would say
that a month ago we considered that the balance of risk for growth was
balanced…which is not the case today,” he said.

“As regards the inflation again we had last month the sentiment
that there was an upward risk for inflation and today we have the
judgement that the risks to inflation are balanced,” he said.

“These are the two major, I would say, changes in the overall
appreciation by the Governing Council of the present situation,” Trichet
said. “All that based upon a baseline scenario that was revised down as
regards growth”.

The shift in risks for growth and inflation, coupled with the
downward revision in the ECB staff’s outlook for Eurozone growth clearly
reduce the need for further monetary tightening over the medium term.

Trichet continued to characterize current monetary as
“accommodative” but noted a “tightening of financial conditions” in some
parts of the Eurozone.

“Of course, our non-standard measures are very important – and are
precisely there to help restore our monetary policy systems,” he said.
“For the future, we’re always willing to do what’s necessary.”

Trichet underlined that there was no liquidity issue facing
Eurozone banks, noting that full allotment of liquidity at fixed rates
had already been decided for 4Q.

“We are supplying unlimited liquidity at fixed rate,” he reminded.
“And when I look at the order of magnitude of the eligible collateral
that the European banks have and can present to get liquidity, which is
the order of magnitude of E13 trillion, and what is provided, which is a
little bit more than E500 billion and oscillating between E550, 530
billion and so forth.”

“You see that there is a possibility to obtain liquidity which is a
multiple of what we are supplying,” he said. Liquidity in euro for the
zone’s banking sector “is not an issue at all.”

–London newsroom: 4420 7862 7492; email: ukeditorial@marketnews.com

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