Friday, Jean-Claude Trichet, President of the European Central Bank said public authorities, executive branches, and central banks must do all possible things to restore confidence and support growth.
Trichet cautioned that ambiguity in policy direction will delay recovery. Further, he said non-standard steps are to be implemented with the active participation of banks.
Regarding the ECB meeting on May 7, Trichet said in a speech in Tokyo that it is important not to create or encourage expectations. He added, Be sure that what we will decide will fully take into account the financing structure of the euro area economy and will be fully in line with our medium-term strategy.
Earlier in the month, the Governing Council member of the ECB, Axel Weber said there is still a little room to cut the main refinancing rate, but it should not go below 1%.
In April, the central bank had lowered the main refinancing rate by a quarter percentage point to an all-time low of 1.25%. The ECB has reduced rate by a total three full percentage points since early October 2008. Economists now expect a further quarter point cut in May.
Annual inflation in the 16-nation bloc eased to 0.6% in March, the lowest rate since the launch of euro ten years ago. However, Trichet said long term inflation expectations remain consistent with price stability.
In an interview to Italian Newspaper Il Sole 24 Ore on April 9, Trichet said the central bank expects a gradual recovery next year provided the economic policy measures announced earlier are introduced in a rapid and highly professional manner.
Late in March, the Organization for Economic Co-operation and Development had said in its interim economic outlook that the currency bloc was forecast to contract 4.1% in 2009 and by 0.3% next year.
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