jean - claude trichet : interview with die presse, der kurier, der standard and salzburger nachrichten interview with mr jean - claude trichet, president of the european central bank, by ms christine domforth ( die presse ), mr reinhard goweil ( der kurier ), mr andreas schnauder ( der standard ) and mr richard wiens ( salzburger nachrichten ), conducted on 28 april 2008 and published on 30 april 2008. * * * will the next decision of the ecb be to cut interest rates or is it possible that you will raise them? trichet : as you know, we at the ecb ’ s governing council take the decisions on monetary policy on a monthly basis after a thorough analysis of the facts and figures. we believe that the current monetary policy stance will contribute to delivering price stability and to firmly anchoring inflation expectations. some days ago governor noyer of the banque de france hinted that the ecb could increase interest rates instead of lowering them. was he expressing the opinion of the whole ecb council? trichet : i do not comment on declarations made by members of the governing council in their own capacity. as you know, the president is the “ porte parole ” of the governing council and expresses the opinion of the whole council. this is what i have done on behalf of the governing council. our opinion is that we believe that our current monetary policy stance will contribute to delivering price stability. allow me also to stress the formidable team spirit that we have in the eurosystem. i would like to praise the work of governor liebscher in particular for his invaluable contribution to our work. the european commission delivered a new, more pessimistic, outlook for 2008 and 2009. does this change your projection? trichet : there is a wide range of forecasts for this year and next ; there are a lot of figures, from the eu, from the oecd, from the imf and from private institutions. in the case of growth, as well as inflation, it depends very much on new data that are incorporated, so it is often a question of timing. what we are observing in the first quarter of 2008 is that the economy was quite robust and in the first half of the year it will probably be reasonably resilient. at this stage we consider that the projection of the imf for the eu may be too pessimistic.

must be careful not to disturb this balance. and here is where i see some cause for concern. regulators might be tempted to lay down rules to cover every eventuality – think of the example i just gave you. and their motivation would certainly be laudable. but their goal would be unattainable. it is just not possible to cater for every potential situation. there are too many possibilities, most of which we cannot anticipate. no one knows what financial innovations might emerge ; no one knows where technological change will lead us ; and no one knows how the economy will evolve over the coming decades. if we try to cover everything, the rulebook will, at some point, become too detailed, too big and too complex. from that point onwards it will stop making the banking sector a safer place and instead create new problems. first, overly complex rules facilitate regulatory arbitrage. yes, we could add page after page to the rulebook, setting out detailed rules, definitions and thresholds governing how banks should deal with risks and specifying, for instance, which tools supervisors should use in certain situations, and when. but with each new page, more loopholes open up. it becomes easier for 2 / 4 bis central bankers'speeches banks to game the system. this defeats the purpose of a rulebook and poses a threat to stability. second, there is the problem of interaction. the more rules there are, the more they can interact and interfere with each other. if there are two rules, there is just one way in which they can interact. if there are 1, 000 rules, they can, in theory, interact in at least 500, 000 ways. it becomes ever more difficult to foresee the overall effect of the rules, and the danger of unintended sideeffects increases. and third, there is the issue of costs. the thicker the rulebook, the more expensive it becomes for banks to comply with it and for supervisors to do their jobs. these costs are justifiable if each additional rule reduces the risk of another crisis. however, at a certain point the costs of the rules begin to outweigh the benefits. so, instead of having overly detailed rules, we should have a strong basic set of rules that allows supervisors some discretion.. supervisors have the relevant skills and experience, and in - depth knowledge of the banks they supervise. we should ensure that supervisors can continue to apply their judgement. they should be empowered to assess the