ECB President scares the markets
Speeking at the hearing of the Economic and Monetary Affairs Committte of teh European Parliament, Jean-Claude Trichet, the President of the European Central Bank (ECB) alerted the financial markets that the credit sequeeze isn’t over yet. With the intention to convince his audience that central banks are in control of the situation (or episode), he actually accented some points that raised doubts among the observers.
Trichet uttered concern about the growth of the monetary aggregates but also suggested that there would be no imminent interest rate hike. Furthermore he made it clear that “we are now in a correction phase which can, as frequently observed in such situations, comprehend episodes of hectic behaviour, a high level of market volatility and elements of over-shooting”, and later on he added: “we are not yet at the end of it”.
All in all, Trichet did not succeed in calming down the nerves, maybe those of the parliamentarians, but definetely not the nerves of those who act in the financial markets.
Background:
Speech by Jean-Claude Trichet (note that the speech begins in French, but the main part is in English): http://www.ecb.eu/press/key/date/2007/html/sp070911_1.en.html