Question: This is just a “yes” or “no” question: Was the Governing Council surprised by the weakness of the data, the recent data?
The second question: Do you think that your actions in the money markets are enough to ease the tensions or do you think that you have to continue to do this and do everything … is there a point in the next few years when things will return to normal?
And also, when you say that “again, there is no bias”, can we read into that that things go either way, that it is equally balanced on one side to the other?
Trichet: On the first question: as I have said we are totally pragmatic and humble in the face of facts and figures. We take them as they are. As regards the number of surveys that have come in and that we took note of, I would not say that we were surprised because we had already identified the risks and we had said clearly that the risks we had listed were on the downside. So, the fact that some of the survey data are very weak was for us the materialisation of risks that we had identified and made public. And again, we will see what happens, we will see what the second quarter and the third quarter bring. And, for what will come beyond the second and third quarters, I would refer you to the rendezvous I had already mentioned to your colleagues, to the meeting in September.
But let me add something. Do not forget that – to again use a metaphor that is familiar – we have only one needle in our compass. That needle is price stability, our definition of price stability. We take all the information that comes in as contributions to indicate what the situation is with respect to that needle in our compass. We do not compare two needles, one of which being price stability and the other business activity or cyclical development , or whatever. That is not the way we operate. Everybody knows that and I am only repeating what everybody knows.
As regards the money market, I have nothing special to say in this respect. I would only mention that we have taken recently decisions together with the Federal Reserve and also with the Swiss National Bank. We had made that public. I think that these are proof of transatlantic cooperation that has been welcomed by the markets. We will continue to follow the situation very carefully. As you know, we have felt from the very beginning that we had a responsibility to contribute to a smooth functioning of the money market. But the tensions that we have seen and we are still seeing on both sides of the Atlantic originated outside the money market. So that it was not up to us alone to eliminate these tensions, but to contribute to a smooth functioning of the money market.
On the bias, I will stick to what I have already said, that we have no bias.
Question: I also have a couple of questions and, if you forgive me, I am going to pressure you a little bit on this growth question because I am not quite sure I understand. The last time you expressed your vision of baseline growth for the euro area, you said that the trough would come in the second and third quarters. Would you say that again today?
Second, a colleague of yours on the Governing Council said recently, if I have got this quote right, that “it is a mistake to think that inflation will fall if the economy weakens”. Do you agree with that statement and is that the sentiment of the Governing Council?
And third: perhaps you have the results of the second quarter bank lending survey with you today. Would you be able to give us a glimpse of those results? If so, let us know whether there is a further tightening of lending standards and whether there is any more thought on the Governing Council on this apparent discrepancy between still strong non-financial corporation lending growth and tightening standards?
Trichet: I confirm that the trough that had been defined a month ago was a trough for the mid-year, for the second and third quarters. There is absolutely no reason not to confirm that. The information we have gained over the past month confirms that. Again, I will not say anything more than that at this stage. I will give you figures at the next meeting with our new staff projections. Our position is clear on the fact that we had identified risks, the fact that some of those risks are materialising and the fact that we see reasons for the materialisation of those risks that are, as I have already indicated, the slowdown of the global economy in particular, and the drain on our economy as a result of the development of the commodity, oil and food prices. All are elements that explain what we are observing at the moment.
As regards inflation, once again, we have only one needle in our compass and we take absolutely all information that is pertinent into consideration to identify the risk of inflation in the months and years to come. And, as always, we look at simply everything. The level of demand is part of this analysis, as is the monetary analysis, the level of exchange rates and so forth. So, we have to, as always, work out a synthesis.
On the bank lending survey, we will – as generally it is the case – publish the bank lending survey tomorrow. What I can tell you at this stage is that we have seen a somewhat lower net tightening of credit standards for loans to households for house purchase, but a somewhat greater net tightening for consumer credit and other lending to households, although starting from a lower level. We have, if everything is taken into account, a somewhat lower net tightening of credit standards for loans to enterprises than that observed in the first quarter. But these are not major changes and there is still a significant tightening of credit according to the bank lending survey. So, I would say, more or less the same level of tightening, but perhaps a little less net tightening. You mentioned the credit dynamism. We are still observing a level of dynamism as regards credit and counterparts of monetary aggregates that remains important. It has been published, so that there is nothing new for you there. But it is true, as high as these figures are that loans to non-financial corporations continue to grow at a rate – according to our last observation – of 13.6%. There has been a reduction in comparison with the previous month. We were at 14.2%, so that the rate is diminishing, but only slightly. We are seeing loans to households and loans to finance house purchase that are at a much lower rate of growth with a further reduction of outstanding credit because in the case of the loans for households we now have a level of 4.2%, after 4.9% in the previous month. So we have a significant slowdown. And for loans for house purchase, we – not surprisingly – have a strong decrease from 5.6% in the previous month to, most recently, 4.4%. But, if everything is taken into account, the dynamism of loans to non-financial corporations has given us an overall level of lending to the private sector that is still very dynamic and I would say again that, in that domain too, we have to be respectful and pragmatic and will have to see what the facts and the figures are. We will continue to look at them with extreme care.