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News : EU Economy Last Updated: Mar 4, 2011 - 6:32 AM

Trichet says on Ireland's EU-IMF program 'the plan is the plan'; Warns interest rates may be hiked in April
By Finfacts Team
Mar 3, 2011 - 2:51 PM

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Jean-Claude Trichet, ECB presidet, speaking at a press conference in Frankfurt, March 03, 2011.

Following the decision of the governing council of the European Central Bank to leave the key ECB interest rates unchanged at its meeting in Frankfurt today, the president, Jean-Claude Trichet said on Ireland in respect of the EU-IMF program, that that 'the plan is the plan'  and should be implemented. On inflation, he warned of the need for 'strong vigilance' and he said interest rates may be hiked in April

In the past the term 'strong vigilance' has been used one month before a hike but there have been exceptions.

The current benchmark interest rate of 1% was set on May 13, 2009.

Trichet said the issue of the interest rate on Ireland's bailout is a matter for the governments who have lent the funds.

In response to a question on burden sharing by private bondholders, he said ECB policy is consistent with a world doctrine, endorsed by the IMF.

When asked about the potential impact of a rate hike on fragile peripheral countries, the ECB president said that the duty of the central bank is to ensure price stability for the 331m citizens of the Eurozone and in the United States, the Fed does not set interest rates for specific states such as Vermont.

Inflation rose to an annual rate of 2.4% last month, exceeding the ECB's target of "below but close to 2%."

Rising oil and food prices have been triggered by the accelerating recovery in emerging markets.

Trichet said nothing can be done about commodity prices but the fear is that the spike in inflation will have second round effects such as in rising wage demands.

The HICP (harmonised index of consumer prices) staff forecast was raised to a midpoint of 2.3%, compared with 1.8% in December.

The new growth forecast sees GDP at a midpoint of 1.7%, up from 1.4% in the December forecast. For 2012, the ECB staff see growth of 1.8%, up from 1.7% in the December forecasts.

Introductory Press Conference Statement

"There is no doubt, that the ECB will tighten before the Fed," Thanos Vamvakidis, FX Strategist at BofA Merrill Lynch told CNBC:

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