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(CEP News) Frankfurt - With upside risks to inflation and prevailing downside risks to growth, the European Central Bank will continue to monitor data, ECB Executive Board member José Manuel González-Páramo said in a speech given in San Sebastian, Spain on Friday.
González-Páramo also said that "nothing essential changed" on Thursday, referring to the ECB's press conference and the bank's focus on fulfilling its price stability mandate. In his speech, González-Páramo echoed Trichet's suggestion that CPI growth would remain above the central bank's target rate of 2% for some time and that the unexpected rise in commodity prices were seen as an inflation risk. González-Páramo added that the ECB was particularly concerned about long-term inflation expectations. However, he did add that the recent fall in consumer prices was marginally positive. Regarding the ECB's decision to keep its main refinancing rate unchanged at 4.25% despite recent data suggesting that the euro zone economy was weakening, González-Páramo stressed that the decision was made to maintain the bank's credibility as an inflation fighter. While conceding that there was a particularly high level of uncertainty surrounding the growth outlook, González-Páramo added that the economy would recover progressively over the coming quarters. However, he also stressed that sustainable growth required sustainable price stability. Furthermore, González-Páramo reiterated the central bank's message that schemes to index nominal wages to CPI must be abolished and emphasized that the historical effects of wage-price spirals must not be forgotten. Turning to the ECB's refinement of its collateral rules, González-Páramo speculated that the changes would limit risk. The executive board member also said the Bank's liquidity operations did not affect credit risk and would continue to provide relief to the financial system. However, González-Páramo added that he continues to see a large amount of uncertainty in money markets. By Todd Wailoo,
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, edited by Nancy Girgis,
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