The monthly ECB bulletin reiterated the comments from Trichet in the press conference following last week's rate decision when the Governing Council decided to keep the key ECB interest rates unchanged, following the 25 basis point increase on 7 July 2011.
The ECB said recent economic data indicate a deceleration in the pace of economic growth in the past few months, following the strong growth rate in the first quarter. Continued moderate expansion is expected in the period ahead. However, uncertainty is particularly high.
For monetary policy, it is essential that recent price developments do not give rise to broad-based inflationary pressures. Inflation expectations in the euro area must remain firmly anchored in line with the Governing Council aim of maintaining inflation rates below, but close to, 2% over the medium term.
At the meeting, the Governing Council decided to continue conducting the MRO (Main Refinancing Operations) till the end of the maintenance period on January 17, 2012. The ECB will also continue to conduct LTRO (Long Term Refinancing Operations) the Governing Council decided to conduct the three-month LTROs to be allotted on 26 October, 30 November and 21 December 2011 as fixed rate tender procedures with full allotment.
Also, to ease the prevailing market tension the Council decided to conduct further liquidity providing schema with a 6-month LTRO which was announced on August 09 2011, with allotment on August 10, 2011 and settlement on August 11, 2011 and will mature on March 01, 2012.
Turning to fiscal policies, the Governing Council stresses the need for strict and timely implementation of the IMF/EU adjustment programs in Greece, Ireland and Portugal.
The Governing Council also welcomes the renewed commitment of all Member States to improve competitiveness and address macroeconomic imbalances. Substantial and comprehensive structural reforms need to be implemented in the countries of the euro area in order to increase the flexibility of their economies and their longer-term growth potential.