ECB President Trichet in his press conference is not breaking any new
ground but did reiterate the belief of some that rates could go lower if
need be (but i’m sure very reluctantly). He did lower both his growth
and inflation forecasts for ’09 and for ’10, he modestly cut his GDP
estimate but kept the inflation estimate unchanged. The main reason for
the drop in ’09 GDP estimates was due to the bigger than expected drop
in Q1. He reiterated that their benchmark rate of 1% was appropriate
considering that ‘inflation expectations remain anchored in the medium
term.’ He said their asset purchase program of covered bonds will begin
in July but did not change the size of it. He also made a point to say
the ECB will ‘quickly unwind their measures when the economy picks up.’
A key difference b/w the ECB and the Fed is the ECB’s understanding that
the less deep you get with policy measures, the easier it will be to
unwind.
