Analysts See Little In ECB Press Conference To Change Outlook 4  FEB   PARIS - Market analysts listening to ECB President Jean-Claude Trichet's monthly press conference today heard virtually nothing new to guide their thinking on monetary policy, liquidity withdrawal or even Greece. PARIS (MNI) - Market analysts listening to ECB President Jean-Claude Trichet's monthly press conference today heard virtually nothing new to guide their thinking on monetary policy, liquidity withdrawal or even Greece. The unanimous conclusion is, as before, that official interest rates are on hold for many, many months to come - until the end of 2010 or even sometime in 2011. Analysts saw no clues on the ECB's next moves to withdrawal liquidity-providing measures during the second quarter, though Trichet did promise they would be unveiled at the next Governing Council meeting in early March. Most of them also saw pretty much the same line on Greece - that it can and must hit the 3%-of-GDP deficit target by 2012, as promised. Some analysts, however, heard a note of greater confidence today over Greece's ability to meet the challenge than in previous Trichet comments. Some noted that the ECB chief came across somewhat more strongly today than in the past on the need for member states to respect EU fiscal rules. Below are excerpts from analysts' comments: TORGE MIDDENDORF, West LB: As expected there were no surprises today. The main refi rate was kept at 1%, and concerning the extraordinary measures, no changes there either. He announced that decisions [on extraordinary measures] would be taken in March, so we have to wait one more month. Maybe it was a bit surprising that Trichet reminded the audience of the huge fiscal deficits of the US and Japan, which was the right thing to do in my opinion, i.e. to remind the markets that there are other countries with much bigger deficits [than the eurozone], and, insodoing, to calm down the markets a bit. RAINER SARTORIS, HSBC Trinkaus: There wasn't really anything new in the press conference. The assessments on the economy and inflation were nearly unchanged from what Trichet said at the last press conference. We continue to see an interest rate hike only late in the second half of the year. Not from the angle...[that] the ECB would be really forced to move then, but rather from the viewpoint that one percent is an emergency interest rate level and the ECB will want to get away somewhat from that level. LUIGI SPERANZA, BNP Paribas: It was actually very much in line with what we expected. The assessment of the economic situation was very much unchanged from January. This is not a big surprise considering the next staff projection will come in March. And also, the recent developments have been in line with the ECB line - uneven, moderate growth and subdued inflation. That was the final message. So, in terms of economic assessment and, of course, implication for the conventional monetary policy - the refinancing rate - I would say no big news and we stay with our view that there will be no increase in the refi rate this year. ELGA BARTSCH AND DANIELE ANTONUCCI, Morgan Stanley: As expected, the ECB reiterated its dovish tone, saying the interest rates are appropriate, inflation pressures subdued and the recovery modest...The ECB is firmly on hold. As far as the unwinding of its unconventional measures is concerned - notably the conditions of the last 6M and the 3M tenders as well as the procedure for the main refi operation - a decision will be taken in March. Some Council Members have hinted at the possibility of switching the 3M tenders back to auctions. The President did not rule out that - like the 1Y tender - the 6M tender might come at a tracker HOWARD ARCHER, IHS Global Insight: The ECB still seems highly unlikely to raise interest rates from the current level of 1.0% for some considerable time to come, given its ongoing caution over the eurozone's growth prospects and perceived muted underlying inflationary pressures. We see no reason to change our view that the ECB will keep interest rates down at 1.0% until at least the fourth quarter of 2010. Furthermore, while we currently forecast interest rates to rise 50 basis points in the fourth quarter to end 2010 at 1.50%, we believe that there is a very real possibility that the ECB could hold fire until 2011. NICK KOUNIS, Fortis Bank: The press conference was pretty uneventful. The most important thing is that he expressed confidence in Greece, he said that he approved of Greece's medium-term budgetary goals and was confident that Greece would achieve them. This was different from last time, when he was warning Greece to get its house in order. CARSTEN BRZESKI, ING Bank: The ECB's assessment of the economy and the inflation outlook were virtually unchanged from the January meeting. President Trichet continued to stress that the Eurozone recovery is likely to be uneven. However, one sentence disappeared from the first paragraph of the introductory statement, i.e, "some of the factors supporting the growth in real GDP are of a temporary nature." In our view, this seems to prepare the ground for a significant upward revision of the next ECB staff forecasts to be released in March. Although the ECB's main message on the economic outlook has remained broadly unchanged over recent months, the uncertainty seems to be gradually disappearing. JOERG KRAEMER, Commerzbank: Looking ahead, the interest rate policy continues to be determined to a large extent by bank lending to the private sector. There are two main factors why we emphasize this indicator: 1. The current stagnation of bank lending reflects at least partly the difficult situation of the banking industry. The ECB will dare to hike rates only if rising bank lending signals that the banking sector is in a position that it no longer needs low rates. 2. The ECB has a very cautious outlook on economic growth. Bank lending lags economic activity. As long as bank lending tends to stagnate, the ECB is waiting for the confirmation signal that the economy is really out of the woods. MARK WALL, DEUTSCHE BANK: The impression that came across was that the ECB is worried that long-term interest rates might suffer a shock unless there is a strong and credible fiscal consolidation. This raises the question of the appropriate policy mix between monetary and fiscal policy. Trichet said that loose fiscal policy is a 'burden' on monetary policy. However, the strategy seems more carrot than stick. The ECB has no need to raise the policy interest rate and there's no pressure to do so for the foreseeable future. With fear of a deteriorating yield environment in mind, the ECB may have tried to transmit a message today that credible fiscal consolidation may keep the pressure off monetary policy. JUERGEN MICHELS, Citigroup: As expected, the ECB provided little news regarding the next steps on the exit from the non-standard measures. However, as Mr. Trichet apparently does not regard the widening in spreads of Greek and other periphery bonds as a risk for euro area overall financing conditions, we expect that the ECB will implement the next measures soon. For March we expect that the ECB will announce an end to the unlimited funding facility - at least for a part of the open market operations - to become effective in April. COLIN ELLIS, Daiwa: In terms of policy, the sense that I got was that maybe they are erring toward moving more slowly rather than quickly. They already set up their exit strategy in December...I think that there has been a prevailing assumption that full allotment will end in April, but [that] there may be those who want to continue it beyond that. Trichet used one phrase in particular...that led me to believe that some people might be thinking that liquidity support is helping peripheral countries and since these countries are going through a deep pain and restructuring now, the question becomes do we really want to risk undercutting their recovery?...I just got the feeling that something like full allotment might go on longer than we had thought. BENJAMIN RIETZES, Bank of Montreal: The tone of the conference was pretty similar to January's. The statement was almost word-for-word the same as January's, in fact. There were few (differences) if any. The highlights are that the ECB is on hold for the foreseeable future. At least well into the second half of the year. There really is no pressure on them to tighten with inflation at 1% and not expected to accelerate much further and money supply growth is also very slow and that doesn't point to any inflation pressures on the horizon. Looks as though they'll be on hold for a while. I think that Trichet is really focused making sure that they (eurozone countries) and markets understand that it's important for all EMU countries to get back to within the 3% deficit to GDP for the year as soon as possible. And he wants to emphasize that any type of breakup of the EMU is extremely unlikely. He calls it 'absurd'. That's what he said last month. And... that's really his focus. Everyone needs to follow the rules. --Paris Newsroom, +331-42-71-55-40; bwolfson@marketnews.com [TOPICS: M$$EC$,M$$CR$,MT$$$$,M$X$$$] 2/4/2010 11:12:00 AM