European Central Bank PresidentJean- Claude Trichetsaid
he’s confident
Greece
can
get its budget deficit under control and signaled officials have no plans to
raise theirkey interest ratefrom a record low of 1 percent.
“We expect and we are confident that the Greek
government will take all the decisions that will permit them to reach that
goal” of cutting the deficit below the European Union’s limit, Trichet said at
a press conference in
Frankfurt
. Earlier,
he said that the ECB’s current interest rate is “appropriate.”
Trichet’s comments on
Greece
contrast with the tougher tone of his Jan. 14 press conference, when he said
the nation can’t expect any “special treatment” from the EU. Since then,
Greece
has
stepped up efforts to cut its deficit and the yield on two- yeargovernment bondsjumped
to the highest in almost a decade.
Proposals announced this week on freezing wages and
revamping the pension system “are steps in the right direction,” he said.
The euro slipped to $1.3812 from $1.3850 before the
press conferenced. The yield on the Greek two-year bond was little changed at
6.408 percent. Its German equivalent was also little changed at 1.079 percent.
Trichet also stressed thatInternational Monetary Fundforecasts
show the euro region’s combined budget deficit of 6 percent for this year will
be smaller than the shortfalls forecast for the
U.S.
and
Japan
.
New Forecasts
Trichet said he’ll wait for new growth and inflation
forecasts in March before deciding when the ECB will step up the withdrawal of
measures used to battle the financial crisis.
“We will continue our enhanced credit support to the
banking system, while taking into account the ongoing improvement in financial
market conditions,” he said.
The Bank of England earlier kept its key rate at a
record low of 0.5 percent and paused its bond-purchase program.
Australia
’s
central bank this week unexpectedly paused in its rate-tightening cycle after
last year’s increases drove up the nation’s currency, hurting exports. The
Federal Reserve last week restated its intention to keep interest rates near
zero for an “extended period,” saying the pace of economic recovery “is likely
to be moderate for a time.”
While the ECB isn’t forecast to raise borrowing costs
before the fourth quarter, it has started to unwind its emergency lending
programs. The central bank in December tightened the terms of its final tender
of 12-month loans, one of its flagship measures during the crisis, and said it
will discontinue its six-month loans after March.
The ECB is still lending commercial banks as much
money as they need at its benchmark rate, rather than having them bid for the
cash, in an effort to get credit flowing through the economy.
(from
Bloomberg)