By Jason Theodorou

European Central Bank President Jean-Claude Trichet has said that the euro-area economy has improved beyond many forecasts, but it was still too early to be sure that economic growth had negated the effects of the economic crisis.

Mr. Trichet said that the market was ‘functioning a little bit better’, but the ECB was still right in setting its benchmark rate at 1%, a figure that represents a record low. Improving market conditions have left Mr. Trichet with the task of reducing the amount of cash metered out to banks, without harming the economic recovery. He has yet to give a clear indication of the ECB’s strategy.

Asked for his view on economic growth, Mr. Trichet said that he saw growth at a ‘moderate, but still uneven pace, in an environment of uncertainty’. He did not give his opinion on recent shifts in market lending rates, only saying that they represent ‘normalised’ conditions.

Investors seem to believe that the euro area economy has overcome its economic problems, with the euro improving by 10% since June. The euro did not show a great deal of change after Mr. Trichet’s remarks, trading at $1.3196 in Frankfurt, compared to $1.3189 before Mr. Trichet gave his thoughts on the economy.

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