(CEP News) Frankfurt - European Central Bank President Jean-Claude Trichet reiterated that he expects a gradual recovery in the euro zone to begin by next year and that the ECB will likely continue to take non-conventional measures through the banking channel.
Speaking in an interview with the Wall Street Journal published on Monday, Trichet said this year will be a difficult one, but that the European economy will begin to gradually recover in 2010.
It's neither an optimistic vision nor a pessimistic vision, Trichet said. It's the present, realistic vision.
The policy-maker also said the ECB will continue to do what is best for the euro zone and that it's pretty possible that we would continue to be non-conventional through the channel of bank financing, Trichet said. This channel remains for us essential.
Trichet also explained that with 70% of euro zone financing passing through commercial banks, compared to 30% that passes through securities other than stocks, that is the reason why we have concentrated our bold non-standard measures - eligibility of collateral, unlimited supply of liquidity at fixed rates - on the commercial bank channel.
Trichet also called on banks to pass on to the real economy the reductions in interest rates. It's up to [the commercial banks], being the main channel of financing of the European economy, to pass along the decisions we have been taking, Trichet said.
Trichet also stressed that there are drawbacks to rates at zero percent and said that, while the ECB may bring its main refinancing rate lower than its current 1.5%, it is not a race. What matters most are the borrowing costs in the market, Trichet said.
At the moment I am speaking, our six-month rates on the money market are a little bit below U.S. six-month rates, and our one-year rates are 13 basis points below the U.S. money market one-year rate, he said
As regards the future rate of our main refinancing operations, presently at 1.5%, I said clearly that we could decrease it again.
Written by CEP News European Staff, firstname.lastname@example.org, edited by Stephen Huebl, email@example.com