Friday, April 17, 2009


The European Central Bank chief Friday brushed aside the view that the euro is weak, while saying that he is "very appreciative" of U.S. policymakers sticking to their strong dollar policy.

Jean-Claude Trichet also signaled that the bank may announce extraordinary measures for financial institutions at its next monetary policy meeting on May 7.

At a seminar held in Tokyo during a visit to Japan, Trichet said the view that the euro is weak "doesn't really seem to reflect the present situation."

"When we started the euro," he said, "the euro-dollar (exchange rate) was at $1.17; at the moment I'm speaking, we are at around something like $1.31."

"That being said," Trichet continued, "I am very, I would say, appreciative, of what is said by our U.S. friends Ben Bernanke, Tim Geithner and Barack Obama that indeed a strong dollar is in the interest of the United States of America."

Commenting on monetary policy, Trichet said, "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."

Most observers expect the ECB, which some critics say has been insufficiently aggressive in cutting interest rates, to take its key rate down at least another quarter percentage point to 1.00% at the May meeting.

While remaining mum on interest rate inclinations, Trichet said he expects the European economy to continue struggling in the near term.

"The year of 2009 is a very difficult year, that's absolutely clear," Trichet said, adding that the continent has, like Japan, been hit by an "acceleration of phenomena."

Recovery would likely come "in the course of 2010," he said, sparked in part by the benefits of the low price level for oil and commodities, which he called both "disinflationary and expansionary."

Addressing the possibility of further non-standard monetary measures, Trichet stressed the centrality banks would continue to play in the European context.

Compared to the U.S., with its mainly "market-based financial system," Trichet said, in Europe "banks play such a dominant role (in providing credit to companies and consumers) that non-standard measures need to be implemented - first and foremost - through intervention and with the active participat

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