ECB rate hike decision unanimous and beneficial, says Trichet

Jean-Claude Trichet, president of the European Central Bank, said today’s decision to raise official interest rates by 0.25% was unanimous, and “anchoring” inflation expectations will benefit the bloc’s populous.

He said the ECB must provide price stability for “all 331m people” in the eurozone, implying that Brussels could not just concentrate on the more indebted periphery, which faces being hit harder by rate rises.

He said the rise to 1.25% would “maintain inflation rates below, but close to, 2% over the medium term”.

The “anchoring of inflation expectations” benefits “all the economy. It is good for medium-and long-term rates and the confidence not only of economic agents such as banks, but also of our fellow citizens,” he said.

High inflation would hit the Eurozone’s poorest citizens hardest, regardless of which country they belong to, he said.

Meanwhile, Trichet also called on the eurozone’s banks – many still on State support – to do “all that was necessary” to strengthen their capital bases, including “taking full advantage of that State support”, retaining earnings and raising extra capital.

This, he said, would allow them to “do their job of financing the real economy. We call on banks and sovereigns to consolidate, preserve, and where necessary improve their own credibility.”

He added the ECB had encouraged Portugal to seek central support, a move which could land the European Financial Stability Facility with a bill of up to €80bn.

David Walker

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