The European Central Bank is considering additional monetary easing measures to support the economy and Europe will see a gradual recovery in 2010 after experiencing exceptionally challenging situations in the current year, ECB President Jean-Claude Trichet told the business daily Nikkei in an interview published on Monday.
Repeating his remarks made on the latest Governing Council meeting, Trichet told the Nikkei that the next rate cut would be very measured. On April 2, when the ECB lowered its key interest rate to a record low of 1.25%, the central bank chief had hinted at further easing in the bank's main interest rate. At the same time, he told Nikkei that the rate-setting body has several good reasons to avoid lowering interest rates to zero.
With regard to the possible new non-standard measures, Trichet maintained that he will be explaining the Governing Council's decisions on its next meeting on May 7. He said the ECB has so far taken non-standard measures like unlimited supply of liquidity at fixed rates and widening collateral framework.
During early deals, the euro slumped against its U.S. and Japanese counterparts, reflecting the uncertainty regarding the form of the non-standard measures and economic woes. The euro thus plunged to a fresh 1-month low of 1.2960 against the dollar and a 3-week low of 128.01 against the yen.
Further, Trichet said the gradual recovery in 2010, as predicted by international public institutions and also the private sector, depends very much on what authorities do to raise confidence.
To improve confidence, you have to be bold to cope with the immediate difficulties. And you have at the same time to be absolutely clear on your medium-, long-term strategy, what I would call the exit strategy, and demonstrate it to the fellow citizens and to the corporate sector. That means you will have to be credible in your path to get back to a normal situation in the medium term, Nikkei quoted Trichet as saying.
He noted that the fiscal spending by governments in the euro area and a series of interest rate reductions will have significant role in supporting the recovery in 2010.
Moreover, Trichet said the Eurozone is closely linked with crisis-hit Eastern and Central European countries in terms of trade and the ECB itself has bilateral relations with the central banks of these countries. He indicated that the ECB would continue to help countries of this region with the European Union and other international institutions in difficulties.
For comments and feedback: contact email@example.com