HIGHLIGHTS: Trichet comments after ECB cuts rates 50 bps

FRANKFURT (Reuters) - The following are comments by European Central Bank President Jean-Claude Trichet on Thursday after the Governing Council decided to cut its key interest rate by 50 bps to 2.0 pct.

REVIVE MONEY MARKET

"You know that our main aim is to revive the money market to help it to function as well as possible. It was what inspired practically all of our decisions, including bold decisions since the very beginning of the financial turmoil.

When I look at the policy rate on the one hand and the three months money market on the other hand, which is important for a large number of borrowers, I have to say that I already said, that we were quite impressed that the transmission of our own decision had been done quite visibly."

FURTHER SLOWING DOWN

"We consider that we have largely anticipated today what is likely to be observed, because we have the sentiment that it was necessary to anticipate this further slowing down."

NEXT IMPORTANT MEETING IN MARCH

"We consider that our next important rendezvous for monetary policy will be in our march meeting where we will have substantial elements of new information our new projections and I would say that taking into account that our February meeting is only in three weeks we do not consider that it would be an important rendezvous for decision po9licy making. The next important rendezvous will be in March.

The question would be should we do that now, should we do that a little later. The unanimity was for doing that now. and with the idea we will have a new rendezvous, but as I mentioned in March.

That being said again as you know and as we are demonstrating at each of our meetings: we are never precommitted.

We have a new rendezvous in March and we will see in March what we will do."

PREVIOUS CUTS AND EURIBOR

"Our understand of the previous interest rate cuts...and you remember that I had said that we will look very, very carefully on the transmission of the previous decisions and in particularly on the further 75 basis point that we had decided to decrease in our last meeting. I have to say that we are observing that market rates, the short term market rates have transmitted quite significantly our decision, particularly when you look at the euribor three months. where you see there has been a very substantional diminishing, progressive diminishing, I would say week after week, day after day, but from that stand point the observation we could make was that it was going on.

It doesn't mean at all of course that we do not have still abnormal spread in the financial market. but taking into account the short term rates that we are influencing clearly we had diminishing which has been in line with the decision that we had in December."

LIQUIDITY TRAP

"(The Fed and BOJ have) their own responsibility and decisions and I have already said that as far as we are concerned, we would be very, very keen to avoid to be put in a situation which for us would not be appropriate, namely a liquidity trap."

UNANIMOUS

"We have decided today to diminish interest rates by 50 basis points unanimously.

We were taking into account a significant further alleviation of inflationary risks due in particular, but not exclusively, to the slowing down of the global and European economy...and because we were anticipating further significant slowing down in comparison with our previous Eurosystem staff projections.

In our decision, there is both the observation of the new information that came since our last decision-making and also the sentiment of the Governing Council that we have to anticipate elements of further slowing down and further alleviation of the inflationary risk."

PUBLIC FINANCES

"The governing council welcomes the European council's reconfirmation of its full commitment to sustainable public finances. In this respect the current economic situation calls for particular prudence with regard to the adoption of extensive fiscal stimulus measures."

STIMULUS

"The current economic situation calls for particular prudence with regard to the adoption of extensive fiscal stimulus measures taking into account the particular fiscal situation in each country.

MACROECONOMIC DISCIPLINE

"It is crucial that all parties concerned make their contribution to lay sound foundations for a sustainable recovery. For this to materialize as early as possible, it is of the utmost importance to maintain discipline at the medium term perspective in macroeconomic policy making, pursuing a stability oriented and sustainable approach."

INFLATION

"We consider that medium term inflation is inline is broadly balanced and in line with our definition of price stability."

It is likely that inflation rates will fluctuate sharply over the course of 2009.

We continue to expect inflation rates in the euro area to be in line with price stability over the policy relevant horizon thereby supporting the purchasing power of incomes and savings."

We have observed in the past humps in the headline inflation that were spectacular.

On the basis of future market indications we will have exceptionally low level of headline inflation this year, particularly mid year, I think it will be very, very low and it will pick up afterwards. Of course it depends on the price of oil and commodities. But the needle that is in our compass is medium term price stability."

GROWTH

"Looking further ahead, we continue to see global economic weakness.

The euro zone should over time reap the full benefits...of policy measure announced over recent weeks.

After today's decision we consider risks to price stability over the medium term to be broadly balanced this takes into account the latest economic data releases and survey information, which add clear further evidence to the assessment that the euro area is experiencing a significant slowdown largely related to the effects to the intensification and broadening of the financial turmoil.

Monetary expansion is moderating, further supporting the assessment that inflationary risks are diminishing.

The governing council will continue to keep inflation expectations firmly anchored in line with its medium objective of inflation rates below but close to 2 percent.

We continue to see global economic weakness and very sluggish domestic demand persisting in the coming quarters as the impact of the financial tensions on activity continues"

INFLATIONARY PRESSURES

"Today's decision takes into account that inflationary pressures have continued to diminish owing in particular to the further weakening in the economic outlook.

Looking forward, we continue to expect inflation rates in the euro area to be in line with price stability over the policy relevant medium-term horizon, thereby supporting the purchasing power of income and savings. After today's decision, we consider the risks to price stability over the medium term to be broadly balanced."

PRICE STABILITY RISKS AND FINCIAL TURMOIL

"We consider the risks to price stability over the medium term to be broadly balanced.

There is clear further evidence to the assessment that the Euro area is experiencing a significant slowdown largely related to the effects of the intensification and broadening of the financial turmoil."

UNCERTAINTY

"All in all the level of uncertainty remains exceptionally high.

The current economic situation calls for particular prudence"