Jean Claude Trichet the new governor of the ECB is trying to convince the media that 'things have changed'. Hopefully he is right. In order to try and set the stage for his term of office, he is quite forethright about his views on the Stability Pact. (Anyone who doesn't visit Fistful regularly could try this post and this one).
Jean Claude Trichet, the European Central Bank's new president, on Thursday warned eurozone countries that the rules underpinning the single currency were "now at a critical point". In a polished performance at his first press conference since taking over from Wim Duisenberg, Mr Trichet said the stability and growth pact provided "an appropriate framework" for ensuring fiscal discipline. He said the budget deficit limit of 3 per cent was "the anchor" for the pact. "It must not be placed in doubt," he said. His remarks came as the ECB held its primary interest rate steady at 2 per cent and signalled rates would remain on hold for some months amid signs that the eurozone economy was finally beginning to pick up speed.
The Bank of England on Thursday raised UK interest rates for the first time in almost four years, making it the first of the world's four leading central banks to tighten its policy since 2000. But Mr Trichet gave no indication that the ECB was close to following suit. The central bank was now more confident about the upturn in the eurozone economy, he said, and "anticipated some stickiness" in inflation rates over coming months because of higher food and oil prices and increases in indirect taxes. But he insisted that price pressures would eventually moderate. Economists said the bank appeared to have adopted neutral "wait-and-see" stance on monetary policy. "A reduction is possible . . . but looks increasingly remote," said Lorenzo Codogno of Bank of America. Mr Trichet also stopped short of giving any signal the ECB was looking to tighten monetary policy in the near term.
Source: Financial Times