No risks of deflation

The ECB usually meets in Frankfurt, Germany but has two meetings a year in capitals of other eurozone countries.

This month's meeting was held amid increasing fears of deflation in the eurozone after preliminary figures from Eurostat showed that the zone's annual inflation dropped into negative territory for the first time on record in June, standing at minus 0.1 percent.

Trichet said this development reflects primarily base effects resulting from past sharp swings in global commodity prices, warning that further decline in annual rates of inflation was anticipated.

But the ECB chief downplayed the risk of deflation in the eurozone, insisting the negative inflation rate would be temporary.

"Owing to these base effects, annual inflation rates are projected to remain temporarily in negative territory over the coming months, before turning positive again. Such short-term movements are not relevant from a monetary policy perspective," he said.

Trichet said eurozone inflation is expected to remain in positive territory in the medium and long term, while price and cost developments are expected to remain dampened in wake of the ongoing sluggish demand in the eurozone and elsewhere.

"Indicators of inflation expectations over the medium to longer term remain firmly anchored in line with the governing council's aim of keeping inflation rates below, but close to, 2 percent over the medium term," he said, adding that risks to the outlook for inflation are broadly balanced.

(Xinhua News Agency July 3, 2009)