Trichet: "ECB Still Focused on Fighting Inflation"

Discussion in 'Wall St. News' started by makloda, Jan 23, 2008.


    an. 23 (Bloomberg) -- European Central Bank President Jean-Claude Trichet said he's committed to fighting inflation even after stock markets plunged and the U.S. Federal Reserve cut interest rates to avert a recession.

    ``Particularly in demanding times of significant market correction and turbulences, it is the responsibility of the central bank to solidly anchor inflation expectations to avoid additional volatility,'' Trichet told the European Parliament in Brussels today.

    The Fed yesterday cut its benchmark rate by three quarters of a percentage point to 3.5 percent after global stock markets tumbled on concern a recession in the world's largest economy will curb global growth. ECB policy makers have indicated they're unwilling to follow the Fed, expressing confidence in Europe's economic outlook and stressing their focus on curbing inflation.

    Still, Europe's service industries this month grew at the slowest pace in more than four years after credit tightened and the euro neared a record, an industry report showed today.

    ``Europe is not going to get special dispensation from a global slowdown,'' Stephen Roach, Chairman of Morgan Stanley in Asia, said on a panel discussion at the World Economic Forum in Davos, Switzerland. ``Europe is not this dynamic, rapidly growing economy.''

    Room for Maneuver?

    Investors have increased bets on the ECB cutting rates. The implied rate on the three-month Euribor futures contract for June fell to 3.77 percent today from 3.94 percent before the Fed's move.

    Trichet on Jan. 10 threatened to raise the bank's key rate from 4 percent if unions push through wage increases that take the jump in inflation into account. Euro-region inflation was 3.1 percent in December, the fastest in six years and well above the ECB's 2 percent limit.

    Trichet suggested today that slowing growth may give the ECB more room for maneuver on rates. While the bank is sticking to its base scenario that the economy of the 15 euro nations will expand about 2 percent this year, there are ``downside'' risks to the outlook, he said. ``We'll see how the real economy develops in the future because it can have an affect on inflation.''

    Policy makers next meet to decide on rates on Feb. 7 in Frankfurt.

    ``Despite the Fed's bold action, we feel that the ECB is still unlikely to ease policy in the short term,'' said Joachim Fels, co-chief economist at Morgan Stanley in London.

    ECB council member Axel Weber said last night that while a U.S. slowdown would ``certainly affect the world economy,'' the effects in the euro area ``could emerge with a time lag'' and may ``be less strong than in former times.''

    ECB Vice-President Lucas Papademos and Executive Board member Juergen Stark also said yesterday that economic fundamentals in Europe remain sound.

    ``Our mandate consists of ensuring price stability for European citizens in the medium term,'' Trichet said today. The ECB has to be ``credible in guaranteeing price stability.''
  2. Daal


    this guy needs to be lynched
  3. why? because you're stupid long?

    or because he thinks not only about greedy crooks but Europe people and their savings?
  4. fseitun


    Trichet is a very academic guy who rigidly abides by his mandate as president of the ECB.

    The main goal of the ECB is to fight inflation and maintain price stability.

    The ECB should not intervene to accommodate the economy or the stock market.

    Trichet has been playing that role by the book.

    If this is good or bad for the European economy doesn't matter at all to him. He's not supposed to tackle those issues.

    He's the anti-inflation MAN. That's all Trichet is about and you'll never hear anything different from his speeches.

    As a European citizen, I don't agree with the current monetary policy.

    When you have America, UK, and Canada cutting rates you know global economies are in trouble, so I find it rather arrogant to ignore what's going on around the world.

    However, I am not mad at Trichet. I am mad at those European Prime Ministers and the way they set up the ECB.

    The ECB - like the FED or BOE - should be able to intervene to accommodate the economy.

    If the economy is getting into recession, you cut rates.

    Funny that Trichet is concerned about inflation in Europe - which is around 3% - while Bernie keeps cutting like crazy despite US inflation being above 4%.

    In conclusion, the whole mission of the ECB should be reviewed and more power should be given to its president so that he can preemptively take action when the economy is screaming for help.
  5. :)
  6. Perhaps the The Weimar Republic would be more to your liking.
  7. Daal


    no because a global slowdown lowers the neutral central bank rate. by not easing he is actually tightening. their supposed to be forward looking, this inflationary pressure will ease the growth slowdown wont
  8. when inflations eases then he can cut
    does it ease now?

    Inflation pressuares will just increase , thanks to globalization

    Growth will return but peoples money will be burnt by inflation if he follows your moronic ideas
  9. Daal is right, the ECB should consider data from around the world (Asia, US, Japan, UK/Spanish/Irish housing), take a hard look at the bond markets and see that the real risk here is deflation and not inflation.
  10. Daal


    yeah, they can keep playing around with not likely events all their life then one day 'the roof falls'. some of these people in ET sound a lot like the federal reserve in 1930 when they said 'we need to save the injections of liquidity for a real crisis'
    #10     Jan 23, 2008