Trichet Calls Activism On Rates Improper

Discussion in 'Wall St. News' started by crgarcia, Feb 13, 2008.

  1. Trichet Calls Activism On Rates Improper

    Wed, Feb 13 2008, 17:42 GMT

    2nd UPDATE: Trichet Calls Activism On Rates Improper

    (Adds further Trichet comments.)

    FRANKFURT -(Dow Jones)- "Activism" on interest rates would be an "improper" response to the financial market turbulence, which is an "ongoing process," European Central Bank President Jean-Claude Trichet said Wednesday.

    The ECB hasn't followed the U.S. Federal Reserve or the Bank of England in lowering rates to stimulate activity, but has kept interest rates steady throughout the current financial market crisis.

    The ECB's key rate is at 4%.

    "The market correction was probably unavoidable and necessary," Trichet said during a conference hosted by the ECB.

    Trichet said that the communique issued after the meeting of the Group of Seven leading industrial nations in Tokyo over the weekend reflects "the large consensus we have at present."

    "The solutions themselves can be nothing but global and closely harmonized," he stressed.

    Transparency is key to the efficient functioning of markets, Trichet said, calling for "increased regulatory convergence" and "improvements in the arrangements for the supervision of cross-border financial groups."

    But, despite all efforts, the financial system cannot be certain that "unavoidable and necessary market corrections" will unfold and be resolved in a "smooth and orderly" way, he said.

    Trichet said it is imperative to draw the lessons from the financial turmoil and include transnational financial institutions as well as the private sector in developing efficient codes of conduct.

    "We have a lot of progress to make," Trichet said.

    Commenting on financial integration, Trichet said that it enhances the transmission of monetary policy and "reinforces the risk-absorption capacity of the system."

    "The euro money market is already highly integrated," he said, noting that the "segment for short-term debt securities...shows some fragmentation owing to the prevailing differences in market standards and practices."

    "Still relatively fragmented securities clearing and settlement systems continue to constitute obstacles to the further integration of securities markets in Europe," Trichet added.

    Deposit insurance is relevant for financial integration and also for the handling of financial crises, Trichet said, and there may be a need for more convergence in European deposit insurance practices.

    -By Nina Koeppen and Roman Kessler, Dow Jones Newswires, +49 69 29725 509;

    (END) Dow Jones Newswires

    February 13, 2008 12:42 ET (17:42 GMT)
  2. In other words, ECB wont cut rates, until the sky falls.
  3. Good for them. They recognize that the market sometimes need to correct, and trying to prop it artifically causes more harm than good. In addition, the ECB has a single mandate of price stability and remains vigilant on inflation.

    Unlike our crappy Fed.