European Central Bank President Jean-Claude Trichet said risks to price stability are balanced and monetary policy in neutral, but the ECB is on high alert for changes to the outlook, the Financial Times reported on Friday. In an interview with newspaper, Trichet sounded the same cautious and watchful tone he presented after the central bank's policy meeting three weeks ago when it left interest rates steady at record lows of 2.00 percent. "As I have said, we consider presently risks to price stability to be balanced. We do not signal a bias but we keep all our options open, without excluding any," Trichet was quoted as saying. The outlook for the recovery, however, is mixed. "We are getting both encouraging and less flattering signals." he said. "Consumer confidence is still disappointing but at the same time the figures on retail sales at the beginning of the year have been encouraging." But the ECB president, who has fretted all year about the low level of domestic demand and has seen both consumer and business confidence waiver in face of sluggish growth, said he saw no risk that export-led growth may falter before consumption accelerates. His remarks gave no indication the ECB was poised to change from the steady monetary course it has held since last June. Financial markets showed no reaction to his comments.
NO CHANGE
Trichet declined to comment on what he would discuss at Saturday's meeting of the Group of Seven (G7) economic powers but said the communique from the G7 meeting in Boca Raton, Florida, in February was "a good one." "I stick to what I signed," Trichet was quoted as saying. On Thursday, U.S. Treasury Secretary John Snow said he expected the G7 finance ministers to repeat the Boca Raton warning of "excess volatilty" in currency markets when they meet in Washington this weekend. On Friday, Trichet said the recent sharp rise in oil prices was "highly unwelcome" for both inflation and growth but said he had confidence in the ECB's ability to weather this shock. Oil futures contracts have been trading at well above $30 a barrel amid tight supplies. Analysts say OPEC oil producers have cut exports sharply over the past month, further cutting into global supplies. Trichet said, in the short-term, the ECB was expecting a "hump" in inflation because of base effects -- comparisons with the previous year -- but this spike did not affect the Bank's medium-term view. "This hump does not affect our medium- and long-term analysis of price stability to be in line with our definition. Our vigilance is the guarantee of this stability." Consumer prices in the euro zone are comfortably within the ECB's goal of just under 2.00 percent and are projected to remain there through 2005. Asked if this provides room to cut interest rates, Trichet repeated risks are balanced and the ECB keeps all its options open. Some economists had expected the ECB to cut interest rates at its April meeting, prompting speculation there was a split in the ECB Governing Council. Trichet said there were no divisions. The council was "profoundly united." Explaining why the ECB gave no bias in monetary policy and instead said that all options were open, the ECB was giving itself maximum flexibility by moving away from signalling rates were fixed for a considerable period of time. He also stressed the importance of "bold reforms" by governments to increase the euro zone's growth potential. Trichet also said the enlargement of the European Union to include 10 mostly East European states was a chance for growth in Europe. "I am as confident for the 10 today as I was for Spain and Portugal 18 years ago." The 10 countries -- Poland, Hungary, Czech Republic, Slovenia, Slovakia, Estonia, Latvia, Lithuania, Malta and Cyprus -- will join the EU on May 1.///