Interest rates on hold as Trichet lauds Irish action

IRELAND is gaining further credibility, according to European Central Bank (ECB) chief Jean Claude Trichet, who yesterday signalled that interest rates are on hold for now.

Mr Trichet said Ireland was “following its path and has demonstrated a capacity” to implement the measures needed to regain its strength.

He said when he looks at Ireland he sees a country which is gaining credibility regularly and is increasing its creditworthiness.

“We can do nothing but encourage Ireland in this path. Improving confidence is, per se, an element of growth activation, which is, of course, of extreme importance.

“Continuing in this direction is good for conditions in the country, confidence in the external side of the country, and for job creation,” he said.

Mr Trichet said there is no change in the bank’s policy toward imposing losses on senior bondholders at Anglo Irish Bank.

The bank chief has previously said he expects the Government to maintain its agreement not to impose losses on the bondholders. Finance Minister Michael Noonan repeated this week his intention to raise the issue of imposing losses on some senior Anglo bondholders.

Yesterday the ECB signalled that its interest rate rise cycle had been halted, saying eurozone inflation risks were no longer skewed to the upside and economic growth would be slow at best.

“We expect the euro area economy to grow moderately, subject to particularly high uncertainty and intensified downside risks,” Mr Trichet said after the ECB left rates at 1.5%, following hikes in April and June.

Inflation should fall below 2% in 2012, he said and price risks were “broadly balanced”.

The Professional Insurance Brokers Association (PIBA) said the ECB rate should, on market conditions, drop by 1% which would bring it in line “with the far more realistic British rate of 0.5%”.

Rachel Doyle, director of PIBA Mortgage Services, said: “If it were to do the right thing and row back on the recent increases, this would put huge pressure on Irish lenders to stall on any further increases.”

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