ECONOMY

ECB chief defends rates

PUNCHESTOWN, Ireland (Reuters) – The European Central Bank yesterday assured finance ministers worried over sluggish growth that the central bank is flexible and stands ready to change interest rates if needed. ECB President Jean-Claude Trichet said he shared the European Union’s diagnosis for a gradual eurozone recovery during informal meetings here with European Union finance ministers at a racetrack outside Dublin. While the risks to this outlook are balanced, Trichet stressed that the ECB was flexible and was ready to change course – either tightening or cutting interest rates – based on new information. «We are not biased. We didn’t say rates were there for a considerable period of time,» Trichet said at a news conference concluding the meetings. Several finance ministers criticized the ECB for failing to say at its policy meeting on Thursday, when it held rates steady at 2.00 percent, that the central bank was leaning toward a credit easing, and Italian Prime Minister Silvio Berlusconi called on Friday for a rate cut. Austrian Finance Minister Karl-Heinz Grasser told reporters on Saturday that he understood the ECB decision, but he noted that eurozone interest rates are one full percentage point above those in the United States, which is growing faster. «I think there is some room to maneuver,» he said. Luxembourg Prime Minister Jean-Claude Juncker, who is also finance minister, had a similar view a day earlier. In an interview with Reuters a little more than a month ago, ECB Governing Council member Vitor Manuel Constancio said that he is cautiously optimistic for eurozone recovery. He said that the eurozone PMI manufacturing survey for March, which rose to 53.3 from 52.5, strengthened that view. «The PMIs were significant. We had them while we were meeting and they were above expectations. Certainly, it was a confirmation that recovery is beginning to show. We hope that assessment of recovery will be confirmed by the first quarter growth data,» Constancio said. Both Trichet and Constancio said that the ECB remains open to assessing any new information that would change the prospects for a gradual recovery in the eurozone, where growth is around 1.6 percent this year up from 0.4 percent in 2003. Trichet said he was asked by the ministers whether the ECB was alert to all new data and evidence and would incorporate that in the ECB’s monthly policy assessment, and be ready to change monetary policy in any direction. «It is ‘yes,’» to that question, he said.