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By Natasha Brereton Of DOW JONES NEWSWIRES LONDON -(Dow Jones)- European Central Bank President Jean-Claude Trichet said Tuesday he doesn't exclude the possibility of cutting euro-zone interest rates further, if inflationary pressures ease.
Responding to audience questions following a speech in London, Trichet said that the central bank would be "pragmatic," and its future decisions would be highly data dependent.
He added that while those countries that have the budgetary flexibility to do so should provide further stimulus to their economies, it's very important to have a stable fiscal position at the European Union level.
"I do not exclude that we will continue to decrease rates, if we have confirmation of the alleviation of risks to price stability," Trichet said.
"We have to look at the risks, and if the risks for inflation are alleviating, we draw the consequences," he added.
Earlier this month, the ECB cut its key rate by 50 basis points to 3.25% in a bid to boost the region's flagging economy, which shrank in the second and third quarters, entering its first recession since the euro's formation. The ECB had already cut rates by half a percentage point in October in a coordinated move with other major central banks.
In his speech, Trichet said there was evidence that euro-zone inflation expectations are solidly anchored, despite recently elevated actual inflation levels.
The annual rate of inflation in the 15 countries that make up the euro zone fell to a nine-month low of 3.2% in October, as energy and food price gains slowed, but remained well above the ECB's target of just below 2%.
"Recent empirical findings show that longer-term inflation expectations in the euro area are to a large extent unresponsive to developments in actual inflation outcomes, further pointing to a solid anchoring of inflation expectations at levels consistent with our definition of price stability," Trichet said.
Asked about an expected large increase in U.K. public borrowing, Trichet only noted that as a member of the E.U. the country is committed to the Stability and Growth Pact.
"It is extremely important that we have a (fiscal) framework at the level of the European Union," Trichet said, adding that the Stability and Growth Pact was vital for the ECB in the absence of a federal government or budget.
"In the present circumstances let's apply all the flexibility that this Stability and Growth Pact offers, and for a number of countries...there is a lot of room, and it can be substantial," Trichet said.
"I would also say (as) a general remark...that for absolutely all the countries in the world, let's not forget that for those...who have room for maneuvering, it's certainly good to utilize (it) under the present circumstances," he said.
But he reiterated that conducting stimulus measures in a country that is in bad fiscal shape could, on the contrary, have a negative impact on its economy.
-By Natasha Brereton, Dow Jones Newswires; (44) 207 842 9254; natasha.brereton@dowjones.com
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(END) Dow Jones Newswires
November 18, 2008 17:52 ET (22:52 GMT)

Publié le 18 novembre 2008 Copyright © 2008 Dowjones