Brussels, 03/02/2011 (Agence Europe) - The president of the European Central Bank, Jean-Claude Trichet, said that the ECB's current analysis of the inflation situation in the eurozone is very similar to three weeks ago with the existence of short-term upward inflationary pressures from the rise in fuel costs and commodities but these pressures have not yet led to changes in the bank's view of the situation (see EUROPE 10293). At the Thursday 3 February meeting of the ECB's Governing Council, it was unanimously decided to keep the euro interest rates unchanged at 1% for the main refinancing operations, 1.75% for the marginal loan facility and 0.25% for the deposit facility.
As far as Trichet is concerned, the important thing is not immediate inflation but rather inflation in the medium-term and the upward price trend is forecast to remain slightly above the 2% mark for most of 2011 but slow down again by the end of the year. This would mean the ECB's achieving its medium-term target of stable inflation. Changes in prices will be closely monitored, particularly events in the Middle East that might push oil prices up. Eurostat says that inflation reached 2.4% in the eurozone in January, compared with 2.2% in December.
Economic governance. The ECB's president called on all eurozone governments to ensure their budget consolidation is absolutely credible, stating that ensuring sound public finance does not contradict the aim for economic growth and job creation because it helps boost confidence, an ingredient currently lacking from most eurozone economies.
Asked what he thought about the plan of Ireland's Fine Gael party (tipped to win the country's general elections at the end of month) to renegotiate the terms of the financial aid package granted to Ireland in return for a drastic austerity programme negotiated between Dublin on the one hand and the European Commission and the IMF on the other (see EUROPE 10305), Trichet said that it was absolutely essential for Ireland's credibility that it implement the multi-annual package. He called for a qualitative leap in economic governance, particularly in the eurozone.
EFSF. Asked about the EFSF, a bailout fund set up in May 2010 to ensure financial stability of the euro, Trichet hoped the EFSF would be as flexible as possible and able to intervene as effectively as possible. Trichet will be attending the dinner of European leaders on Friday to discuss economic governance (EUROPE 10307). (M.B./transl.fl)