European Central Bank President Jean-Claude Trichet has defended the bank's decision to keep euro zone interest rates unchanged, saying they were at appropriate levels and that there had recently been more positive signs from the bloc's economy.
European Central Bank President Jean-Claude Trichet:
"We feel, given our judgement on inflationary pressures and on price stability in the medium term, that these rates are exactly what we need," he told French radio station Europe 1 a day after the ECB left its key interest rate unchanged at 2.00 percent.
Trichet said the central bank remained watchful but was not preparing the financial markets for either an increase or decrease in interest rates.
"I am not preparing the markets, in the name of the Governing Council, for a fall in rates. I am not preparing them for a rise in rates. They are currently, given all the information we have at our disposal, appropriate. But we remain vigilant," he said.
Trichet said there were signs of improvement in euro zone economic activity. The ECB is predicting an upturn in the second half of the year.
"We have to remain very prudent of course....but it is a fact that we have signals that have been going in the right direction, I'm talking at the European level," he said.
"The last indications we have had in studies in industry, on the overall economy, have gone rather in the right direction these past two months, June and July. So we will see."
Most analysts believe the ECB will leave rates on hold until well into next year as it awaits firm evidence that the economy in the 12-nation zone, which hit a soft patch in the second quarter, is back on a firmer footing.
Rainer Guntermann, an economist for Dresdner Kleinwort Wasserstein, said though Trichet 's interview struck a similar tone to previous ECB statements, greater hawkishness might be apparent when Trichet holds his next news conference on Sept. 1.
"Just a few weeks ago the fear was that the slowdown was intensifying, but this is now not the case," Guntermann said. "For now the ECB will be relieved in a sense that numbers confirm their recovery expectations."
Thursday's ECB meeting was held via a teleconference rather than person-to-person, as usual in the August summer holiday period, but a fuller statement on the Governing Council's thinking will be included in the ECB's monthly bulletin next Thursday.
Guntermann predicted no big shift in tone.