"At its meeting in Athens, the ECB left the key phrases of its statement virtually unchanged," Bank of America Senior Economist Holger Schmieding said. "As in April, the ECB is signalling that it expects to keep rates at their current levels for the time being."

However, while Schmieding felt that Trichet's speech did not vary greatly from last month, the Bank of America economist did note some subtleties in May's speech.

Schmieding highlighted that Trichet stated that inflation "remained above 3% for the past six months" rather than emphasizing the fall in HICP to 3.3% from 3.6%.

The ECB president also did not use the word "temporary" in describing the inflation spike and said that it was "imperative" that high inflation rates "do not become entrenched in longer-term expectations", Schmieding said, noting that this wording could be interpreted as slightly hawkish.

"All in all, these changes do not signal any policy-relevant shift," Shmieding added. "Trichet himself played down the changes to the section dealing with inflation by emphasising in response to a question that the ECB is 'very much in the same mode' with respect to the inflation outlook, adding that 'we didn't change our vision' of inflation since the last ECB meeting."

"In our view, domestic fundamentals in the euro zone will slowly tilt towards a need for lower rates," Schmieding said, suggesting that the exchange rate and oil price shocks would eventually take their toll on the euro zone economy.

Schmieding also speculated that unemployment would begin to rise slowly and inflation would temporarily return to 3.6%

"Based on current evidence, we project that the process of attrition in the euro zone economy will be more clearly visible over the summer than the healing process in global markets and the US economy," Schmieding said. "If so, an ECB rate cut could still come onto the agenda after the summer break. We continue to see a 60% probability for one ECB rate cut in 4Q 2008, probably in October," concluded."

"During today's press conference ECB president Trichet more or less repeated his statements made in early April," Commerzbank economist Jörg Krämer said, adding that the ECB was divided between high inflation rates and slowing growth.

"In contrast to the majority of economists, we do not expect that the ECB will cut rates already this year," Krämer emphasized. "If anything, president Trichet emphasized the inflation problem a bit more."

Krämer also noted the absence of the word 'temporary' in Trichet's description of the high inflation period, the added warning of second-round inflation effects from wage setting and the emphasis on how long-term inflation expectations should not rise.

"Such a mild shift in the statement does not come as a surprise after euro zone inflation has been above 3% for six months now," Krämer said. "However, the remarks also show that the ECB is not considering cutting interest rates at all."

"We feel fine with our forecast that the ECB will keep the refi rate at 4.0% until year-end."

As soon as Trichet began to speak, the euro fell to $1.5312 from $1.5368, only to rebound and end at 1.5433 USD after the Q&A period.

Against the pound, the euro rose to £0.78764 from £0.78453.

In fixed income, yields on the two-year bond fell to 3.7729% from 3.79% at the end of Trichet's Q&A session. As of 10:25 a.m. EDT, the yield had fallen further to 3.7448%

The Bund saw similar declines, dropping to 4.0981% from 4.1469% when Trichet began his press conference. Just like the Schatz, the yield on the 10-year bond slid further to 4.067% as of 10:25 a.m. EDT.

The September Euribor contracts went to 95.395 points from 95.415 when Trichet started speaking, only to bounce back to 95.41 points at the end of the Q&A session. It had risen even further to 95.44 points as of 10:25 a.m. EDT.

By Todd Wailoo, This email address is being protected from spam bots, you need Javascript enabled to view it , edited by Nancy Girgis, This email address is being protected from spam bots, you need Javascript enabled to view it