March 18, 2009 / 7:40 AM / 10 years ago

ECB's Trichet says recovery possible from 2010

PARIS (Reuters) - Economic recovery may set in from next year, European Central Bank President Jean-Claude Trichet said on Wednesday but added that the ECB was ready to take extra steps to boost the economy if needed.

European Central Bank President Jean-Claude Trichet arrives to speak at the Center for Financial Studies (CFS) Presidential Lecture "Europe - Cultural Identity - Cultural Diversity" in Frankfurt March 16, 2009. REUTERS/Johannes Eisele

“The year 2009 will be very, very difficult,” Trichet told Europe 1 radio. “At the same time, there is quite general agreement between all public and private institutions that 2010 may be the year of moderate recovery in growth.”

Federal Reserve Chairman Ben Bernanke said this week the United States could start recovering next year if there was political will to finish the costly rescue of its shattered banking system.

Asked whether the ECB could follow its U.S. and UK counterparts in directly buying assets, for example bonds, to boost the economy, Trichet said:

“We are considering at the moment whether it is appropriate to take complementary measures which would not necessarily be identical with those that our colleagues have taken.”

The ECB cut rates to an all-time low of 1.5 percent earlier this month, and analysts and traders expect them to reduce rates to 1.0 percent or lower by the middle of the year.

Trichet said the bank had cut rates in an extremely rapid and significant manner because inflationary pressures were declining, and had not decided whether the current rates were the lowest possible.

“We remain vigilant and in the monetary sphere as in the budgetary sphere what is important is to take bold decisions immediately where necessary and at the same time to reassure and inspire confidence on our capacity to maintain price stability in the medium and long term,” he said.

ECB policymakers have said there is limited room to cut rates further as taking them to zero percent could actually reduce the effectiveness of monetary policy.

Central banks in the United States, Japan, Britain and Switzerland have cut official rates close to zero in a bid to stimulate their struggling economies.

Ahead of a meeting of Group of 20 leaders on April 2, U.S. policymakers have urged Europe to do more to boost its economy on the fiscal front.

Bank of England Governor Mervyn King said on Tuesday that the world’s top economic powers urgently needed to commit to more stimulus and fix their banking systems in order to combat the worst downturn in a generation.

Additional reporting by James Mackenzie, editing by Mike Peacock

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