No Remarkable Pronouncements From Trichet

April 8, 2010

The ECB kept its key interest rate levels, unveiled no specific new details about haircuts to rein in liquidity-supportive facilities, and released a formal statement that stuck closely to script.  It called rates “appropriate,”  inflation expectations “well anchored” and consistent with target, growth prospects “moderate” but “uneven” and set in an environment of “uncertainty.”  Consumption will be limited by a weak labor market and business spending by low capacity usage.  This slack in productive resources points to subdued inflation in the near term, while continuing weak money and loan expansion rates suggest continuing low inflationary pressure associated with monetary developments in the medium term.  Risks surrounding the outlooks for growth and prices are “balanced.”  A dovish tone in the comments about economic growth at the turn of 2009 and 2010, including a remark about the drag from bad weather, constitutes the main modification in an otherwise ordinary report.  On Greece in Q&A, Trichet said that the EU statement represents a “serious commitment.”  He has no choice but to make positive remarks on the efficacy of fiscal consolidation and to discourage any talk about defections from the common currency, but, really, one wonders if he’s in any position to know what the governments in Germany and elsewhere are likely to do on this matter when crunch time arrives.

Copyright Larry Greenberg 2010.  All rights reserved.  No secondary distribution without express permission.

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