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Sunday, 7 September 2008

Economic squeeze hit 'rock bottom'

ROME - THE president of the European Central Bank (ECB) said on Saturday that the economic squeeze has 'hit rock bottom', telling Italian television that he expects a 'gradual revival' over the course of 2009.

'Going by our calculations, just published, during the second and third quarters of this year, we hit rock bottom,' Mr Jean-Claude Trichet told RAI 1 on the sidelines of an economic forum attended by political leaders at Lake Como, Italy.

The eurozone economy contracted 0.2 per cent in the second quarter of 2008, and finance ministers from France and Belgium called again this week for the ECB to consider measures that would boost economic activity when it determines the level of interest rates for the 15-nation zone.

The ECB left its main lending rate unchanged at 4.25 per cent on Thursday and Mr Trichet's comments at a subsequent press conference implied it would remain steady for some time.

He underscored the need to prevent a second round of inflationary pressures that might be created by strong wage demands and said that the current inflation rate of 3.8 per cent was cause for concern.

Many analysts nonetheless forecast an easing of ECB monetary policy in the first half of next year as the central bank is forced to respond to slowing growth. -- AFP

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