–Adds Comments On Euro-Dollar, Timing Of Policy Moves

LONDON (MNI) – European Central Bank President Jean-Claude Trichet
signaled further monetary tightening in the months ahead at the ECB’s
regular monthly press conference Thursday.

“We will continue to monitor very closely all developments,” the
ECB chief said.

The comment is normally a signal that rates will be hiked in two
months’ time.

By failing to deploy the “strong vigilance” phrase, Trichet
apparently aimed to signal that the next rate hike would not come in
June, as a growing number of observers had expected.

June Bunds rallied on Trichet’s comments.

Trichet noted that today’s decision was taken unanimously by the
Governing Council. He reminded that the Council never pre-commits itself
on policy moves and can raise rates whenever it deems necessary.

“As you know we are never pre-committed and we can increase rates
whenever we judge appropriate to do that.”

“I will not comment on the market,” he said. “We will take our
decision whenever we judge that it is appropriate to deliver price
stability in the medium run, as we did in the past and the first 12
years of the euro area.”

Trichet insisted that inflation expectations in the Eurozone
remained solidly anchored and that the ECB would publish its survey of
forecasters later.

“We have the anchoring of medium-term, longer-term inflation
expectations in line with what we had observed, which means that we had
solid anchoring of inflation expectations,” he said.

Trichet also noted with satisfaction that the volatility of EONIA
had calmed of late in the wake of the central bank’s rate hike in April.

Trichet said that the ECB took the exchange rate situation into
account when assessing the monetary situation.

“As regards the euro-dollar, I will only say that we are, of
course, incorporating in our own analysis the exchange rate situation,”
he said. “It is one of the parameters we incorporate,” he added.

The euro has been strengthening in the months since the ECB first
indicated that it would start to tighten policy.

The ECB chief also noted the recent comments from US Treasury
Secretary Tim Geithner that a strong dollar was in the interest of the
United States.

–London newsroom: 0044-207-8627492: email: ukeditorial@marketnews.com

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