The president of the European Central Bank, Jean-Claude Trichet, sought yesterday to keep his options open in the face of intense pressure to say whether the ECB will indeed raise interest rates (as previously signalled before the credit crunch) at its next meeting on 6 September.
The state of the German banking industry after the effective collapse of IKB bank and Landesbank Sachsen Girozentrale, as a result of their exposure to US sub-prime liabilities, heightens the issue.
M. Trichet said that his last comments on interest rates - suggesting a rise - came before the recent turbulence in the markets and added that the ECB will take all relevant factors into account in its next rate decision.
Speaking in Budapest, M. Trichet said the ECB's governing council had not discussed monetary policy since 2 August, when he hardened the central bank's stance on inflation by talking about the need for "strong vigilance".
"What I said on 2 August was before the market turbulence," M. Trichet said. "The next assessment is to be made on 6 September. We will then have to assess all of the elements of ... the economy. We will assess the risks ... and will take the appropriate steps at that moment."
The euro slipped after his comments as traders further discounted the prospect of a September rate rise. The ECB approved an additional €40m (£27m) in medium-term (three-month) support to the European banking system last week.
Jean-Claude Juncker, chairman of the eurozone's group of finance ministers, said the US home loan crisis would not have a severe impact on the EU economy. "For the moment we think the impact will be minimal," the prime minister of Luxembourg said yesterday.Reuse content