Brussels, 07/04/2005 (Agence Europe) - On Thursday, the Governing Council of the European Central Bank decided the minimum bid rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility would remain unchanged in the euro zone at 2%, 3% and 1% respectively. Jean-Claude Trichet, ECB President, told the press that so far no secondary effects to the detriment of inflation and growth have been noted.. He was convinced that market players are aware that, if it were to prove necessary, rates would immediately be put up. In his view, there is “so far … no significant evidence of underlying domestic inflationary pressures building up in the euro area” and the “risks to price stability over the medium term remain and continued vigilance” is therefore essential, mainly because of the unfortunate rise in oil prices.
Inflation estimates for the month of March remain unchanged compared to the February figure (2.1%), but annual rates should remain “somewhat above 2%”, Jean-Claude Trichet warned, not foreseeing a fall below 2% during the year. Without giving exact figures or referring to the spring forecasts published by the Commission this week (which forecasts 1.6% growth in 2005 and 2.1% in 2006 for the euro zone: EUROPE 8920), Mr Trichet confirmed that recent data on economic activity is “mitigated” and points to “moderate” growth without showing “a strengthening in underlying dynamics”. He stressed the role of domestic demand, saying that the very favourable financing conditions” support investment and “consumption growth should develop in line with real disposable income growth”. In his view, global growth remains solid, providing a favourable environment for euro area exports. He also refused to base his arguments solely on the more pessimistic growth forecasts for securities markets, which could point to signs of depressed growth.
The continuing high oil prices is the main shadow on the scene, Mr Trichet admitted. Given the very significant recent rises in prices per barrel, to a very high level (about $75), he felt that “in the coming months, annual inflation rates are likely to remain somewhat above 2%”. It is important for consumers to be as economical as possible when it comes to energy, he said.
Turning to fiscal policies, Mr Trichet expressed concern saying that, in several countries, fiscal perspectives are worrying as imbalances are not projected to decline, as planned earlier, and in some cases are even forecast to rise. He therefore restates his powerful message in favour of strict implementation by the Ecofin Council and the Commission of the new agreement on the Stability Pact.
Asked about the consequences of possible rejection of the Constitution in France, the former governor of the Bank of France said he did not have work hypotheses other than approval and ratification of the text.