ECB chief says economic woes to persist for quarters

XinHua News
ECB chief says economic woes to persist for quarters
2008-12-09 04:37:59

BRUSSELS, Dec. 8 (Xinhua) -- The current economic woes arising from the global financial crisis is expected to persist for a few quarters in the euro zone, the European Central Bank (ECB) President Jean-Claude Trichet warned on Monday.

The combined economy of the 15 European Union (EU) nations that use the euro already plunged into a technical recession in the third quarter of this year, for the first time since its establishment in 1999.

"Global economic weakness and very sluggish domestic demand can be expected to persist in the last quarter of 2008 and in the next few quarters," Trichet said in a speech to the Economic and Monetary Affairs Committee of the European Parliament in Brussels.

"Subsequently, a recovery should gradually take place, supported by the fall in commodity prices and assuming that the external environment improves and financial tensions weaken," he added.

Trichet told the EU lawmakers that the eurozone economic growth could be between minus 1 percent and zero percent, according to the ECB's latest forecast.

In a bid to stimulate the economy, the ECB cut its benchmark interest rate by 75 basis points on Thursday, putting the overall reduction at 175 basis points in less than two months.

"We will continue to keep inflation expectations firmly anchored in line with price stability, thereby supporting sustainable growth and employment, and contributing to financial stability," Trichet said.

Thanks to significant drop of oil prices, the eurozone inflation eased in recent months and fell to 2.1 percent in November, close to the 2 percent ceiling preferred by the ECB to maintain price stability.

"With lower commodity prices and weakening demand, annual inflation is expected to be in line with price stability over the policy-relevant horizon," Trichet said.

Editor: Sun