Source : The Business Times, August 14, 2007
FRANKFURT - European Central Bank president Jean-Claude Trichet said on Tuesday that money market conditions were returning to normal and called on investors to keep their 'composure' in the face of volatility.
'We are now seeing money market conditions that have gone progressively back to normal,' he said in a statement.
'As I did after our last meeting, I call on all parties concerned to continue to keep their composure. This attitude has been welcome and effective in recent days.'
Mr Trichet said that cooler heads would 'help to consolidate a smooth return to a normal assessment of risks' in the market.
He said that the central bank, which sets monetary policy in France, Germany, Italy and the 10 other countries that use the euro, had kept a close eye on developments prompted by the crisis in the US home loan sector.
'We have provided in particular the liquidity which was needed to permit an orderly functioning of the money market,' he said.
He acknowledged that the market was gripped by 'nervousness', caught in 'a period in which we see increased volatility in many markets and a significant re-appreciation of risks'. But he urged investors to take the long view.
'In some respects, what has been observed can be interpreted as a normalisation of the pricing of risk,' Mr Trichet said.
He pledged that the ECB would continue to monitor the situation 'whilst euro-area financial markets in general are going back to normal functioning'. The Frankfurt-based ECB injected another 7.7 billion euros (US10.5 billion) into the market on Tuesday after pouring more than 200 billion euros into the market since Thursday to head off a credit crunch sparked by the US mortgage crisis. -- AFP
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