January 23, 2010 / 7:01 AM / 10 years ago

ECB always ready for action on any price threats-Trichet

FRANKFURT, Jan 23 (Reuters) - The European Central Bank stands ready for action to tackle any threats to price stability, ECB President Jean-Claude Trichet was quoted on Saturday as saying.

In an interview with German news magazine FOCUS, Trichet said the ECB — as well as the U.S. Federal Reserve — was determined to protect price stability.

“We always take the decisions necessary to guarantee price stability over the medium term: an inflation rate below, but close to, 2 percent,” he said.

“It is precisely because of the challenges posed by price stability that we stand ready for action at all times.”

The ECB held rates at a record low 1 percent this month and economists do not expect rate hikes until the end of the year.

Trichet brushed off questions about whether lifting euro-zone interest rates would prompt a rise in the euro EUR= without parallel steps by the Fed, saying he trusted in U.S. support for a strong dollar.

“I am convinced that the U.S. authorities - both the central bank and the Treasury - consider that a strong dollar vis-a-vis the other major floating currencies is in the interests of the United States,” he said.

Fed Chairman Ben Bernanke and U.S. Treasury Secretary Tim Geithner “know that a loss of monetary credibility would be damaging.”

Trichet also kept up pressure on euro-zone nations facing high public debt and deficits to put their budgets in order — particularly Greece, which has been downgraded by all three major ratings agencies.

“Ireland has also taken these courageous and difficult steps. I am convinced that, given the nature of the situation, the Greek government will do likewise in order to meet the 3 percent (of GDP) goal it has just committed Itself to for 2012.”

Asked if he could envisage Greece having to leave the euro area if it did not resolve its problems, he confirmed his previous stance, saying: “I don’t comment on absurd hypotheses.”

Reporting by Krista Hughes, Editing by Chizu Nomiyama

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