At the press conference following the ECB's monthly rate decision press, at which it left it's key interest rate unchanged at 1%, central bank President Jean-Claude Trichet issued a statement of two halves, addressing monetary and fiscal policy. On the monetary front, the statement was little changed from his more recent monthly missives. In summary, the euro-area and global economy are recovering at a sluggish pace and the outlook is rather fragile.

The bank's governing council did, however, make its first reference to a possible exit strategy from current emergency policy, saying that, "Looking ahead... not all of our liquidity measures will be needed to the same extent as in the past". This echoes the statement made by Bundesbank President Axel Weber a week ago, when he said that the ECB's 12-month refinancing program -- the main liquidity tool used by the bank during the credit crisis -- might not be available next year. The 12-month refinancing program was used by banks to take huge loans from the ECB, worth billions in some cases, at rates near 1%, with a 12-month maturity.

On fiscal policy, Mr. Trichet again noted that governments need to return to fiscal stability (a shot at euro-area governments currently bulking up their budget deficits and national debt). Interestingly, he added that "high public deficits and debts may complicate the task of the single monetary policy to maintain price stability", which should sound as a huge warning bell from the head of the ECB. Down the line, high public deficits could act as a destabilizing factor on the euro area, creating price instability and weighing strongly on the EUR/USD exchange rate.

The Q&A conference was straightforward, with Mr. Trichet reiterating his dissatisfaction with the weakness of the dollar and echoing calls on the U.S. to stand behind its "strong dollar policy." Also during the Q&A session, Mr. Trichet put a lot of emphasis on the fact that banks should repair their balance sheets.

• The Governing Council decided to leave the key ECB interest rates unchanged
• Available data and survey-based indicators continue to signal an improvement in economic activity in the second half of this year
• The euro area should benefit from the inventory cycle and a recovery in exports, as well as from the significant macroeconomic stimulus under way
• In the second half of this year, quarterly real GDP growth rates could be back in positive territory
• The euro area economy is expected to recover at a gradual pace in 2010
• Annual HICP inflation stood at -0.1% in October, according to Eurostat's flash estimate, compared with -0.3% in September
• Over the policy-relevant horizon, inflation is expected to remain positive, with overall price and cost developments staying subdued
• The annual growth rates of M3 and loans to the private sector declined further in September, to 1.8% and -0.3% respectively
• The annual growth rates of monetary aggregates will most likely be affected downwards by base effects that are associated with the intensification of the financial turmoil one year ago
• The annual growth rate of bank loans to the non-financial private sector turned slightly negative in September
• The monthly flows of loans to households remained positive and even increased
• Banks should take appropriate measures to strengthen further their capital bases and, where necessary, take full advantage of government measures to support the financial sector
• As the transmission of monetary policy works with lags, expect that policy action will progressively feed through to the economy
• Looking ahead, and taking into account the improved conditions in financial markets, not all our liquidity measures will be needed to the same extent as in the past
• The Governing Council will make sure that the extraordinary liquidity measures taken are phased out in a timely and gradual fashion and that the liquidity provided is absorbed
• The very large government borrowing requirements carry the risk of triggering rapid changes in market sentiment, leading to less favorable medium and long-term interest rates
• High public deficits and debts may complicate the task of the single monetary policy to maintain price stability