ECB's Trichet rejects Weber view on bond buying
European Central Bank President Jean-Claude Trichet took issue with recent comments on ECB policy by Bundesbank chief Axel Weber, saying they did not represent the views of the central bank's governing council.
In an interview with Italian daily La Stampa on Sunday, Trichet said the governing council as a whole did not agree with Weber's remark last week that the ECB's government bond-buying program had not worked and should be scrapped.
"No! This is not the position of the Governing Council, with an overwhelming majority," he said, according to an English transcript of the interview published on the ECB's website.
"This non-standard measure, like all other such measures, was designed to help restore a more normal functioning of our monetary policy transmission mechanism. And we are withdrawing all the liquidity, euro for euro, that is supplied through this program," he said.
He also struck a less hawkish note on interest rate policy than Weber, an influential member of the governing council and one of the top candidates to take over when Trichet's own ECB term expires next year.
Last week, Weber said policymakers should not wait too long before withdrawing emergency liquidity measures and raising interest rates, prompting widespread speculation of divisions among the ECB's leaders.
"As you know, I never comment on remarks made by fellow members of the Governing Council," Trichet said.
"What is important, of course, is that there is only one single currency; there is one Governing Council, only one monetary policy decision, and one President, who is also the porte-parole of the Governing Council," he said.
"At the last ECB press conference, I said very clearly that current interest rates are appropriate," he said, adding that the ECB had built a "very, very remarkable track record" on price stability, with average annual inflation of 1.97 percent since it took over charge of monetary policy.
"And thanks to this credibility, inflation expectations are extremely well anchored for the next five and 10 years in line with our definition of price stability," he said.
Referring to exchange rate fluctuations that have raised fears of a currency war between global powers as the dollar has fallen sharply against other major currencies, Trichet repeated warnings against excessively violent swings on forex markets.
"On exchange rates I will say that excess volatility and disorderly movements in exchange rates always have adverse implications for economic and financial stability," he said.
He said emerging market countries including China had agreed to reforms to improve exchange rate flexibility, and he welcomed the fact that U.S. authorities had confirmed their traditional support for maintaining a strong dollar.
"I consider it very important that the U.S. authorities also recently confirmed their long-standing position that a strong dollar vis-a-vis the other major floating currencies is in the interests of the United States."
[Source: By James Mackenzie, Reuters, 17Oct10]
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