The European Central Bank will reassess its outlook for gradual euro zone recovery if consumer spending fails to pick up, ECB President Jean-Claude Trichet said in an interview published on Tuesday. Consumer confidence is weaker than it should be at this stage of an upswing, Trichet told the German business newspaper Handelsblatt in an English language article on its Web site, www.handelsblatt.com. Asked whether recent data had changed the ECB's view from its March meeting that risks were balanced for a gradual economic upturn, Trichet said the "working assumption is of a gradual European recovery." But he added: "In case our expectations for stronger household consumption and overall domestic demand were not to materialize, we would work out our assessment accordingly, fully in line with our monetary policy strategy." While Trichet sounded slightly more cautious, analysts said it does not point to the central bank shifting toward cutting interest rates in the foreseeable future. Rather, it echoes similar concern from fellow ECB policymakers, such as Ireland's central bank president John Hurley, who said on Monday that recovery will prove "unconvincing" until consumer spending increases. "It seems like the data have been discouraging enough that the ECB needs to reassess its outlook," said Lara Rhame, senior economist at Brown Brothers Harriman in New York. "I still don't think they will cut rates this year, but they may need to acknowledge disappointing growth and that implicitly moves them to an easing bias."
The euro drifted down slightly after Trichet's comments but hewed to a narrow range against the dollar at 1.2343 . Financial markets are expecting the ECB to keep rates at historic lows of 2.00 percent when they gather on April 1, though they see strengthening chances of a June rate cut. In March, the ECB cited weak consumption as one risk to its outlook for recovery. Trichet repeated that in the interview. Asked whether government calls for lower interest rates were actually detrimental -- as France and Germany asked for unsuccessfully in March -- Trichet said the central bank would not allow itself to be influenced in one direction or another, but would take the rate decision in line with its monetary strategy. Trichet stuck to earlier statements when asked whether he was now less concerned about the euro's rate than when it was approaching the $1.30 level at the start of the year -- when the ECB expressed concern about currency moves. "I stand completely by our European consensus and by our joint declaration in the G7," Trichet said, referring to a February statement by the Group of Seven (G7) richest industrial nations in Boca Raton, Florida, which called excessive currency volatility 'undesirable'.///