Brussels, 10/05/2007 (Agence Europe) - Interest rates in the eurozone remained unchanged on Thursday, but signs of a rise in June were confirmed. The Governing Council of the European Central Bank (ECB), held in Dublin and attended by Commissioner Almunia, decided that the minimum tender rate applied to main refinancing operations would remain unchanged at 3.75%. The interest rates on the marginal lending facility and the deposit facility will remain at 4.75% and 2.75% respectively. This, according to Jean-Claude Trichet, was a unanimous decision. He did, however, immediately call for “strong vigilance” with regard to price stability. By using this term, which is regularly used to suggest an imminent rise in rates, the ECB president confirmed before the press the assumption that there would be further monetary tightening in June. With monetary policy still “on the accommodative side”, he refused all comment over and beyond that date.
Prospects for growth are still good, with favourable conditions for euro exports, domestic demand high and investment dynamic, with consumption that should also strengthen further over time, Mr Trichet explained after the meeting. Risks surrounding this favourable outlook for economic growth remain on the downside, given the possible rise in protectionist measures, further increases in oil prices and concerns about possible disorderly developments due to global imbalances. From 1.8% in April, the rate of inflation will be influenced in coming months by last year's energy price volatility. At an annual rate, it should therefore fall in coming months before rising again at the end of the year to hover at levels around 2%. The upward risks for price stability remain, due to oil prices, additional increases in administered prices and indirect taxes beyond those announced and decided thus far. The latter may “pose significant upward risks to price stability” not least in view of the favourable momentum in labour markets observed over the past few quarters, Mr Trichet said, saying he would pay “particular attention” to monitoring wage negotiations in member states. It is therefore important that collective agreements be “sufficiently differentiated” and that account be taken of the level of price competitiveness, the ever high level of unemployment in many economies and productivity developments across sectors, he stressed.
The underlying rate of monetary expansion remains strong (M3 reached an annual rate of 10.9% in March) and there are ongoing high levels of credit growth in a context of already ample liquidity, said Mr Trichet. He said that action would be “in a firm and timely manner” to ensure price stability - but does this mean that one should expect monetary constraint to continue at the same rate (every three months) after June? Mr Trichet said that, at that time, he will say what is to be done, i.e. everything to ensure price stability, without making the 4% mark (which should therefore be reached next month) a penalising level for growth.
The ECB president reaffirmed that they would urge all countries and regions of the eurozone to have balanced budgetary policies. He said that, alongside public spending, everything should be done to ensure rigour As far as the high level of the euro compared to the US dollar is concerned, he said in response to journalists that he had noted with interest the declarations made by the US Treasury secretary, who confirmed that a strong dollar is in the interest of the United States. “Our mandate is not being questioned by any country”, Mr Trichet said, welcoming the fact that the calls for amendments to the statutes of the ECB during the French presidential campaign no longer have such appeal. (ab)