european central bank : press conference – introductory statement introductory statement by mr jean - claude trichet, president of the european central bank, paris, 5 october 2006. * * * ladies and gentlemen, the vice - president and i are very pleased to welcome you to the press conference here in paris. i would particularly like to thank governor noyer for his kind hospitality and express our special gratitude to the staff of the banque de france for the excellent organisation of the meeting of the governing council. let me now report on the outcome of our meeting, which was also attended by the president of the eurogroup, prime minister juncker, and commissioner almunia. at today ’ s meeting, we decided to increase the key ecb interest rates by 25 basis points. this decision reflects the upside risks to price stability over the medium term that we have identified through both our economic and monetary analyses. today ’ s decision will contribute to ensuring that medium to longer - term inflation expectations in the euro area remain solidly anchored at levels consistent with price stability. such anchoring is a prerequisite for monetary policy to make an ongoing contribution towards supporting sustainable economic growth and job creation in the euro area. also after today ’ s increase, the key ecb interest rates remain at low levels, money and credit growth are strong, and liquidity in the euro area is ample by all plausible measures. our monetary policy therefore continues to be accommodative. if our assumptions and baseline scenario are confirmed, it will remain warranted to further withdraw monetary accommodation. the governing council will therefore continue to monitor very closely all developments so as to ensure price stability over the medium and longer term. turning first to the economic analysis, the quarter - on - quarter growth rate of real gdp in the euro area for the second quarter of 2006 was confirmed at 0. 9 %. moreover, since our previous meeting on 31 august, eurostat has revised upwards the growth data for the two preceding quarters, thereby confirming that a significant acceleration in economic expansion has taken place over the past few quarters. on the basis of the revised data, economic activity has been growing at a quarterly rate of 0. 7 % on average over the last four quarters, the unemployment rate has been on a falling trend, employment growth has recovered and employment expectations overall have remained favourable. all in all, the economic recovery now appears somewhat stronger than on the basis of earlier data. it has become more broadly based and is mainly supported by domestic demand. the available

oversight, nor too much to prevent the regulated businesses from meeting their customers ’ needs. some regulation is appropriate and necessary but striking the right balance means that at some point regulation can go too far and end up reducing the public ’ s welfare. in recent years, the federal reserve and other agencies have made oversight more effective by better differentiating prudential regulation and supervision based on the asset size of banks, the complexity of their activities, and the related risks they pose to the financial system. this is especially important for community banks, most of which managed risks well before and during the 2008 financial crisis and have managed their risks well since. achieving these principles also requires following consumer protection laws and regulations, including fair lending laws, to ensure fairness and broad access to credit and financial services that enable economic opportunity for individuals and communities. the second principle is that the regulatory framework should be effective, but also efficient, and that means assessing the impact of the requirements. for the federal reserve, it means that we consider both a rule ’ s benefit to safety and soundness and any potential negative effect, 1 / 4 bis central bankers'speeches including limiting the availability of credit and services to the public, and the implications of compliance costs on banks. the wisdom in this approach is evident when considering the effect of a regulation on community banks and their role in providing financial services to their communities. community banks have often been one of the few or only sources of credit and financial services to their customers. their smaller operational scale relies on fewer staff to reach a more disbursed customer base with limited resources for compliance activities. regulations should consider the potential impact on the availability of services in a community, as well as the costs to the bank of implementing a rule, particularly in more rural locations. it is necessary that a full and careful practical analysis of costs and benefits be a part of every rulemaking. the third principle is that regulation and supervision should be consistent, transparent, and fair. regulators are obligated by law to act in this manner, and it also makes good practical sense. these principles enhance safety and soundness and consumer compliance by making sure supervisory expectations are clear and that banks understand and respect the regulatory requirements. supervisors should not and cannot be everywhere at every moment. but they should be available to provide clarification or answer questions when needed. a clear understanding of the rules and our expectations and a respect for the reasonable application of them is an effective approach to ensure effective compliance. by promoting respect and trust