ECB head says credit crunch likely to continue
Güncelleme Tarihi:
The head of the European Central Bank, Jean-Claude Trichet said the credit crunch is continuing and it is not evident that the worst is over, the BBC reported on Tuesday.
"We are seeing 'an ongoing, very significant market correction,'" Trichet was quoted as saying by the BBC.
Trichet, comparing the recent rises in energy and food prices to the 1970s oil shock, warned that if central banks were tempted to cut interest rates now, more serious problems could follow.
Trichet said the failure of most European economies to digest tighter monetary policy in the 1970s caused higher wages that undermined the region's ability to compete.
The net result was mass unemployment, he said, adding that they were still fighting unemployment that was a "legacy" of that era.
While the Consumer Prices Index (CPI) has risen sharply, high inflation "will not last forever," Trichet also said.
The ECB did not raise its interest rates due to the ongoing inflationary pressures even amid an economic slowdown and maintained rates at 4 percent. According to the BBC's news report, Triche also implied that a cut in interest rates was not on the cards.