President ECB: Extraordinary measures effective

12-08-2009 06:16

Jean-Claude Trichet, President of the European Central Bank (ECB), stated today that the ECB’s extraordinary measures have been effective for the economy in difficult periods. Such measures will be withdrawn step by step and well-timed, restated Trichet.

Extraordinary measures

“The measures had a positive influence on the capability of banks to supply credit to the euro zone economy, guaranteeing that the credit market environment appropriately reflects the Governing Council’s point of view regarding monetary policy,” the President of the ECB stated Monday.

Withdrawal

“The stimulus will be withdrawn well-timed and step by step. It should be well-timed because it has to be adjusted to the current conditions rather than to forecasts made in the past. The economic conditions recover gradually and for that reason stimulus should be withdrawn step by step, as there are still downside risks.”
The European Central Bank decided last week to withdraw several unconventional liquidity measures step by step, as they assume that the measures will be less needed than in the past.

ECB’s decisions

Trichet stated that the European Central Bank will preserve the fixed interest levels in all the major refinancing project, at least until mid-April 2010 but in principle for as long as required. This should guarantee banks the required liquidity, as the ECB will persist to accommodate banks completely.
The ECB decided to not undertake additional one-year projects besides the December project, which yet has been proclaimed.

Trichet

The central banker continued by saying: “The circumstances in financial markets have improved, which proves that phasing-out of some liquidity measures is justified, since they are less needed. We also intent to terminate the 6-months refinancing projects after finishing the final project at the end of next year’s first quarter.”