Thursday, March 4, 2010

Mr. Trichet Speaks to the Masses- 03.04.2010

"If there's one thing I learned in prison it's that money is not the prime commodity in our lives... time is."
--Gekko, MNS

Highlights from ECB President Jean-Claude Trichet’s Statement

Rates remeain unchanged at 1.00%

Euro Zone Inflation and Growth

•Inflation expectations remain firmly anchored inline with the Governing Council’s aim of keeping inflation rates below, but close to, 2% medium term

•2010 Inflation forecast .8% to 1.6%

•2011 Inflation forecst .9% to 2.1%

•Euro area has continued to benefit from significant macroeconomic stimulus

•2010 GDP growth forecast .4% to 1.2%

•2011 GDP growth forecast .5% to 2.5%

•Loans to non-financial corporations can be expected to remain weak for some time after economic activity has picked up

•We expect price stability to be maintained medium term, supporting the purchasing power of euro area households

Quantitative Easing

•We decided to continue conducting both the main refinancing operations (MROs) and special-term refinancing operations with a maturity of one maintenance period as fixed rate tender procedures as long as necessary

•The Governing Council will continue to implement phasing-out of the extraordinary liquidity measures

•Banks should use improved funding conditions to strengthen their capita; bases and take full advantage of government support for recapitalization

Greece and The PIIGS

•High levels of public deficit and debt place an additional burden on monetary policy and undermine Stability and Growth Pact as a key pillar of Economic and Monetary Union

•All countries will be required to meet their commitments under excessive deficit pressures


•Key challenges in order to reinforce sustainable growth and job creation is to accelerate structural reforms

•Sound balance sheets, effective risk management and transparent, robust business models are key strengthening banks and ensuring access to finance

This commentary is similar to what I read int he Fed's Beige Book yesterday. Economic growth will be slow at best. Inflationary pressures remain subdued. The Central Banks will begin to unwind QE and pull some liquidity from the system.

Patrick M. Ambrus
Managing Partner
Analyze Capital LLC

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