It was very much a case of 'as you were' in terms of ECB interest rate policy, following Thursday's May meeting of the Governing Council. Official interest rates were of course left unchanged at four per cent, as had been universally expected. And it also appears that the ECB's overall assessment on growth and inflation has changed little over the past month or so.

On growth, Bank President Trichet reiterated that the fundamentals of the euro area economy remain sound, citing 25-year lows in the unemployment rate and sustained profitability in non-financial corporates. The ECB continues to expect "moderate but ongoing real GDP growth" with the outlook supported by strong growth in emerging economies as well investment and consumption prospects, though the impact on purchasing power of higher food and energy prices is cited as a dampening influence on the latter. In the Q&A session, Trichet noted the mixed nature of some of the recent economic data (eg the Services PMI was a bit stronger than expected, but the EC business confidence surveys were on the weak side of forecasts) but he did refer to the fact that overall GDP growth appears to have been resilient in the first quarter.

Trichet provided an early snapshot of the ECB's latest Survey of Bank Lending (due to be released tomorrow) which he said did pick up a further tightening of credit conditions across the euro zone, which is not surprising given the clear anecdotal evidence on this front in recent months. However, Trichet again played down somewhat the impact, up to now, of the credit tightening on loans and credit extended to firms, concluding that "the availability of bank credit to euro area firms has not been significantly impaired by the financial turmoil thus far". Nonetheless, the potential for market turmoil to have a more negative impact on the future course of the economy is highlighted as one of the factors skewing the risks to a highly uncertain growth outlook to the downside.

But despite the downside risks to growth, the ECB remains concerned about inflation developments. The statement noted that inflation has been above three per cent for the past six months and that it "is likely to remain significantly above two per cent in coming months", reflecting the impact of higher food and energy prices. That wording probably understates the likely near-term outlook, which could well see inflation remaining above three per cent until the Autumn.