Brussels, 04/05/2006 (Agence Europe) - The Governing Council of the European Central Bank (ECB) decided on Thursday to keep the euro zone interest rates at the level of March this year (EUROPE 9143). The minimum tendering rate applied to key refinancing operations remains at 2.5% , that of the marginal lending facility at 3.5% and that of the deposit facility at 1.5%. Recent data confirm the assessment of the outlook for price developments and economic activity in the euro area, but it is necessary to remain “very vigilant” to ensure that risks to price stability over the medium-term do not materialise, ECB President Jean-Claude Trichet explained on Thursday after the meeting attended by Joaquin Almunia, Commissioner for Economic and Monetary Affairs.
The results of inquiries and recent indicators show continued growth during the second half of the year, with, above all, strengthened private consumption and global economic activities that are still high, and the risks in such a scenario seem “generally balanced”. With oil prices again surging, the transparency of markets must continue to be improved and investments increased in this sector. With a 2.4% inflation rate in April, compared to 2.2% in March and 2.3% in February, there is still the risk that prices will increase, mainly including future rises in price per barrel, indirect effects of past oil increases or rises in prices administered.
In a context where salary movements remain moderate and contained, Mr Trichet nonetheless confirmed when speaking to journalists that the main risk for price stability was still that of second-round effects. “As I have said before, I do not now see any materialisation of these second round effects but we must be vigilant”, he stressed. The annual inflation rate should thus remain above 2% in 2006 and 2007, he said, going on to say that he would exercise strong vigilance in this respect.
Rejecting the idea of a predetermined decision or a systematic approach, Mr Trichet stressed the relevance of the scenario followed so far by the ECB, recalling that growth that is more rapid than expected would increase the risks. If this main scenario is confirmed in the future, nothing would therefore rule out a rise in rates, possibly on 8 June during the Governing Council's meeting in Madrid. As he had done in April (EUROPE 9169), the president of the ECB reminded reporters who were pressing him with questions that “contrary to what some of you might think, there are no rules excluding initiatives once we are outside Frankfurt”. Finally, Mr Trichet added that they all agree they are involved in a process and following a certain scenario and that “if the main scenario is confirmed, it may be necessary to continue lifting the accommodating nature of monetary policy”.