© The Financial Times Ltd 2015 FT and 'Financial Times' are trademarks of The Financial Times Ltd.
November 4, 2010 7:35 pm
Jean-Claude Trichet has said he does not believe US leaders are deliberately following a weak dollar policy, highlighting his phlegmatic response to the wave of fresh quantitative easing unleashed by the Federal Reserve.
The European Central Bank president had “no reason” to suspect Ben Bernanke, Fed chairman, or Tim Geithner, US Treasury secretary, were “playing the strategy or tactics of a weak dollar”.
He saw few immediate implications for the ECB policy strategy, which, in stark contrast to the Fed’s, remains focused on gradually unwinding emergency measures taken to support the banking system and economy in the past two years.
Mr Trichet would not comment “on what is done by other central banks that have their own responsibility”. He was speaking in Frankfurt after the ECB left its main interest rate unchanged at the record low of 1 per cent for the 18th consecutive month.
His remarks avoided a damaging transatlantic spat between the world’s two most important central bankers, but analysts said they did not disguise the dangers posed for the ECB by the Fed’s bold action announced on Wednesday, which immediately drove the euro sharply higher against the dollar.
“They have kind of pretended it away,” said Julian Callow, a European economist at Barclays Capital. Carsten Brzeski, at ING in Brussels, said: “Trichet seems to be one of the few people, maybe the only one, in the world to still believe in the US administration’s strong dollar policy.”
ECB governing council members almost certainly voiced worries at their meeting on Thursday over the global inflationary implications of the Fed’s move, but they may have wanted more time to assess the impact, which would be offset in the eurozone by the stronger euro.
Mr Trichet meets Fed and other central bank leaders at a gathering in Basel this week.
Offering a flavour of the likely discussions at the ECB, Otmar Issing, its former chief economist, said in Berlin that he saw “no reason” for injecting additional liquidity into the financial system.
The ECB’s assessment of eurozone economic prospects remained largely unchanged from October’s. If anything it had become more upbeat, analysts said, by dropping a previous reference to “weak money and credit growth”.
Mr Trichet confirmed the next steps of the ECB’s exit strategy would be unveiled at December’s meeting.
Please don't cut articles from FT.com and redistribute by email or post to the web.
Sign up for email briefings to stay up to date on topics you are interested in