Brussels, 03/03/2011 (Agence Europe) - Economic operators which have an effect on the setting of prices “and not just the social partners” cannot put forward the suggestion that the inflation level will remain high, European Central Bank President Jean-Claude Trichet said on Thursday 3 March. He called on them to do all in their power to avoid the “second round effects” which will come about through the influence on their activities (for example, wage setting) of the current rises in energy and commodities prices, thereby feeding into a more structural price rise. Indicating that he felt there were greater threats of price rises, Trichet recommended vigilance in this area. He did not rule out a rates increase at the next meeting of the governing board. Until then, the ECB has decided “unanimously” to keep its interest rates unchanged (1% for the main refinancing operations, 1.75% for the marginal lending facility and 0.25% for the deposit facility). Unconventional bank refinancing measures have been retained until at least July 2011.
The ECB has updated its inflation and growth forecasts. It says that inflation will be between 2% and 2.6% in 2011 and between 1% and 2.4% in 2012. Growth will be of the order of 1.3% to 2.1% in 2011 and between 0.8% and 2.8% in 2012.
Economic governance. Trichet reiterated the Bank's position that legislative proposals aiming to strengthen economic governance in Europe are moving in the right direction but will not allow the EU to draw all the conclusions of the debt crisis. Criticising the member states which are trying to weaken the process, he urged the European Parliament to act to strengthen the rules of the Stability and Growth Pact, making, for example, the decision-making process more automatic and focusing more on the less competitive countries. Trichet was also pleased that the new European stability mechanism will not make provision for automatic participation by private creditors. This would, he opined, have been absolutely counter-productive as it would have put the EU at a disadvantage against its international partners. (M.B./transl.rt)