Forex

The following are previous comments from ECB President Jean-Claude Trichet:

On March 10, Trichet expressed concern over extreme movements in foreign exchange markets, saying that such moves were undesirable for growth. He also repeated his “extreme attention” to comments from U.S. policy-makers backing a strong greenback. He said global economic growth was pointing to downside risks while emerging economies were showing considerable resilience to the market turmoil.



On March 7, Trichet said that globalization, while dampening manufacturing goods prices, could also contribute to upside risks to price stability. Trichet reiterated that price stability was necessary for economic and job growth and that central banks must be credible in keeping prices stable. He also commented on the current financial turmoil, saying that market corrections may have consequences on inflation and that the ECB is monitoring these corrections closely.



On March 6, delivering a press conference following the bank's decision to hold rates unchanged, Trichet confirmed the presence of strong short-term inflation pressures and upside risks to medium-term price stability, fed by current food and energy prices as well as possible tax increases. He emphasized that medium-term price stability was the main concern of the ECB. However, Trichet also stated that inflation was expected to moderate gradually. Going into more detail, Trichet said that the ECB projects the HICP rate for 2008 to lie between 2.6% and 3.2%, with that range falling to between 1.5% and 2.7% in 2009. The ECB president emphasized that these projections were based on assumptions that commodity prices were decreasing. The ECB president also highlighted that uncertainty regarding economic growth in the euro zone remained “unusually high”.



On March 3, Trichet said it was very important for the U.S. to maintain its strong dollar policy.

On Feb. 28, he reiterated the ECB’s mandate to safeguard price stability. “Price stability is a necessary condition for sustained economic growth and sustained job creation, and that the responsibility for price stability is best placed in the hands of an independent central bank,” Trichet said.

On Feb. 25, Trichet spoke on the importance of the emerging economies of the Asia-Pacific area and on their ability to blunt the current slowdown that European economies are experiencing. “The Asia-Pacific region occupies a far more important place today than it used to only a decade ago, but one which will likely be superseded in importance by its role in the future,” he said.

On Feb. 15, Trichet spoke in Madrid on structural reforms for the European economy, calling for wage moderations and labour reforms. Trichet said that employment growth had been particularly strong in the euro zone. However, with labour productivity growth having slowed down over the same period, the present challenge would be to realize simultaneous growth in both employment and labour output. He noted that this focus on inflation would not counteract job creation and economic growth, emphasizing that anchoring inflation was necessary for both.

On Feb. 14, Trichet said that no member had called for rate hikes or cuts at the last meeting of the Governing Council on Feb. 7. He said that emerging markets were beginning to experience inflationary pressure, notably from food prices, adding that this phenomenon highlighted the global risks to price stability. Trichet also reminded attendees of the Bank's commitment to anchoring inflation expectations and preventing second-round inflation effects, which the Bank was firmly committed to fighting.

On Jan. 23, Trichet did not deviate from his quest to fight inflation, saying that the baseline growth scenario for Europe remained intact and that price stability was a key component of economic growth.

On Jan. 17, Trichet said that monetary policy was not able to solve all problems, calling for additional fiscal reforms by governments. Trichet also said that anchored inflation expectations were an essential requirement for stable economic growth.

On Jan. 16, Trichet said European growth would be in line with its potential and that nothing had occurred since his press conference on Jan. 10 to change the Governing Council's outlook.

Previous market commentary suggests Trichet is neutral on inflation and growth.