ECB President Trichet opened his monthly statement as follows:
Based on its regular economic and monetary analyses, the Governing Council decided to keep the key ECB interest rates unchanged, following the 25 basis point increase on 7 July 2011. The information that has become available since then confirms our assessment that an adjustment of the accommodative monetary policy stance was warranted in the light of upside risks to price stability. While the monetary analysis indicates that the underlying pace of monetary expansion is still moderate, monetary liquidity remains ample and may facilitate the accommodation of price pressures. As expected, recent economic data indicate a deceleration in the pace of economic growth in the past few months, following the strong growth rate in the first quarter. Continued moderate expansion is expected in the period ahead. However, uncertainty is particularly high. For monetary policy, it is essential that recent price developments do not give rise to broad-based inflationary pressures. Inflation expectations in the euro area must remain firmly anchored in line with our aim of maintaining inflation rates below, but close to, 2% over the medium term. (…) (S)hort-term interest rates remain low and financing conditions are favourable. Thus, our monetary policy stance remains accommodative. We will continue to monitor very closely all developments with respect to upside risks to price stability.
In a situation in which markets are tumbling all over the place, incoming data was pointing to a sharp decline in the pace of recovery (from already inadequate levels), the ECB reassures us that it is acting decisively to combat… “upside risks to price stability”.
I don’t think that further comment is required.