Update: "a word out of line" - Trichet says not appropriate to leverage the EFSF... Not what the market wanted to hear.
On one hand, the ECB keeps Germany happy with no rate cut, on the other, he promises as much liquidity as possible (but probably not enough - see below) and paints a very bleak picture of the economy in the period ahead.
- Trichet Says inflation likely to stay above 2% in months ahead
- ECB to continue fixed rate, full allotment MROs till July 2012
- Trichet says economy faces ‘intensified downside risks’
- ECB to resume covered-bond purchase program to the tune of €40 billion
- Trichet says ECB to offer 13-mth LTRO
- ECB to offer LTROs in October
- Trichet says inflation to ease afterwards
- Trichet says inflation expectations must remain anchored
- Inflation risks broadly balanced, Trichet says
- Euro-Area growth will be very moderate in 2H, Trichet says
- Growth risks remain on downside
Bottom line: no recapitalization from the ECB, but the central bank will make rolling of existing debt as easy as possible, and allow insolvent European banks to pledge any assets they have for cool cash.
Judging by the market's response, this may not be nearly enough to satisfy those always looking for more liquidity.
Bullets via Bbberg