European Central Bank President Jean-Claude Trichet said today that financial markets are undergoing a significant correction and reassessment of risk pricing.
Trichet also said he was proud that the ECB had acted quickly and decisively to address money markets' needs for extra funds.
"We are currently witnessing a significant market correction with a reappraisal of risk, and episodes of high volatility and turbulences on various markets having threatened in particular the normal functioning of the money market," he told a conference on Malta's adoption of the euro.
Trichet said he was making no comment on current economic and monetary conditions as the ECB meets to decide interest rates on Thursday. Policymakers are expected to leave the benchmark rate at 4.0 per cent, but Trichet said the ECB was helping to stabilise inflation expectations.
"We are also reaping the benefits of a highly credible monetary policy strategy that is anchoring long term inflation expectations at low levels," he said.