ECB's Trichet says price stability needed to safeguard credibility

ECB's Trichet says price stability needed to safeguard credibility

	Published : Fri, 30 Nov 2007 10:08 By : Agencies Print this Story

PASSAU, Germany (Thomson Financial) - European Central Bank president Jean-Claude Trichet warned that only price stability will safeguard the central bank's credibility and create the preconditions for new jobs in the euro zone.

'We have to avoid second-round effects,' he told journalists at the Passau publishing group last night.

'We must avoid that price increases for oil, energy and food are extended to the entire economy. We will use all our instruments for this.'

He said the ECB must keep inflation expectations low.

Commenting on the recent credit market crisis, Trichet said all involved parties should learn lessons from the events, including credit rating agencies, banks, regulators and central banks.

The most important thing is to foster more transparency, he said.

'In times of turbulence on markets, when there is fear, secrecy always creates problems.'

To avoid the reoccurrence of such problems, there may be need for another rating agency 'in Europe or in Asia' to complement the existing three main agencies -- Standard & Poor's, Moodys and Fitch.

Also, a more speedy introduction of the Basel II capital adequacy regulations may have helped avert the crisis.

'If we had already had the protective mechanisms and measures, we would be in much better shape now.'

maria.sheahan@thomson.com

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