Indeed, Mr. Trichet said that "risks to price stability have increased further" and that the ECB is in a state of "hightened alertness," which is a new phrase that we haven't seen in his commentary. Furthermore, despite recent declines in various measures of Euro-zone services and manufacturing sector growth, Mr. Trichet called the economic fundamentals "sound." In fact, the ECB is a bit more optimistic on economic prospects for the region, as 2008 growth forecasts were revised up to 1.5% - 2.1%, from 1.3% - 2.1%. On the other hand, the ECB foresees a slowing in the economy in the longer-term, as they revised their 2009 forecasts down tp 1.0% - 2.0% from 1.3% - 2.3%. Overall, it is clear that the ECB has absolutely no intention of cutting rates this year, and in fact, Mr. Trichet said during the Q&A session that there is some potential that the central bank will raise rates next month.
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