Europe Economy

Trichet Says Currency Volatility Harms Growth


European Central Bank President Jean-Claude Trichet said on Thursday that excessive swings in foreign exchange levels are not good for growth and that the central bank's view on the euro-zone economy remained intact.

"Excessive volatility plays against growth," Trichet said in an interview with Dutch television channel NOS, which was published on its Web site on Thursday.

Asked whether recent financial turmoil would harm Europe's economies, Trichet said that "at this stage uncertainty has augmented" but that it was probably too early to make a judgment and that the central bank's baseline view on economies remained intact.

A Reuters poll on Wednesday showed most economists now expect the ECB to hold interest rates at 4% through next year, as a global credit squeeze sparked by the U.S. subprime mortgage crisis clouds the economic horizon.

Trichet was in the Netherlands on Wednesday to address a conference in Heerlen, near Maastricht, where the treaty establishing the European Union and the ECB was signed.

ECB Lends at Punitive Rate

Meanwhile, the European Central Bank lent out 3.9 billion euros ($5.5 billion) on September 26 at its premium rate of 5%, figures showed on Thursday.

The sum is the largest amount borrowed using the marginal lending facility in almost three years, since October 2004, when 7.8 billion euros was borrowed.

An ECB spokesman declined to comment or give details of which bank or banks had used the lending facility.