Jean-Claude Trichet cautioned against a relapse into complacency and failure to carry through on promised financial reforms on the final day of the Federal Reserve’s annual retreat at Jackson Hole on Saturday.

The president of the European Central Bank said that even though “we are a little bit out of the current episode” an enormous amount of work remained ahead.

His comments came in a speech in which he vigorously defended the ECB’s response to the crisis – saying its “steady-handedness” had helped make its policy effective.

Mr Trichet said the ECB decision to raise interest rates in July last year – a move many analysts say was a mistake – cemented public inflation expectations. He argued that this helps to explain why inflation expectations did not later fall as much in the eurozone as they did in the US when the crisis intensified later in the year.

Falling inflation expectations make interest rate cuts less effective, because what really matters for the economy is not the nominal interest rate but the real or inflation adjusted rate. The lower the expected inflation rate, the less stimulative any official interest rate will be.

The ECB chief produced charts showing that real interest rates (rates adjusted for market-based measures of expected inflation) were lower in the eurozone than in the US for much of the period since last September.

Mr Trichet also highlighted the fact that financial markets – which have rallied strongly since early July – have been supported by an extraordinary set of government guarantees, which in effect transferred risks from private balance sheets to public balance sheets.

Without that “we would have had a collapse and a meltdown” he said. Mr Trichet estimated that governments had assumed risks equal to 28 per cent of gross domestic product in the eurozone and about 30 per cent in the US.

Mr Trichet’s caution provided the latest evidence that the ECB will be in no rush to withdraw emergency steps taken to combat the crisis. Other ECB governing council members also used the Jackson Hole conference to argue against the early launch of any “exit strategy”.

Ewald Nowotny, Austria’s central bank governor, told Reuters: “What we see now is that to a large part this is still a recovery sponsored by public measures.”

In June, the ECB reacted to demand for liquidity by pumping EURO 442bn in one-year loans into the eurozone banking system. One option for its next offer of such loans, scheduled for late September, would be to make them less financially attractive. But Mr Nowotny said: “I personally do not see at the present moment a need for changes in our policy structures”.

Separately, Erkki Liikanen, Finland’s central bank governor, told Bloomberg:

“There is no reason to reassess our monetary policy stance.”

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