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ECB chief indicates possible rate increase under inflation pressure

03-04-2011 09:01 BJT

BERLIN, March 3 (Xinhua) -- European Central Bank (ECB) President Jean-Claude Trichet said on Thursday that the ECB may raise interest rates next month due to mounting inflationary pressures.

"An increase of interest rates in the next meeting is possible, " Trichet told a regular monthly press conference in Frankfurt after ECB's policy-making Governing Council meeting decided to leave its key interest rate untouched at a historic low of 1 percent.

"Strong vigilance" was warranted and risks to prices were "on the upside", said Trichet, adding that "the continued firm anchoring of inflation expectations is of the essence."

Annual inflation in the 17-member eurozone hit a 28-month high of 2.4 percent in February due to rising prices in oil and food, exceeding the ECB's aim of keeping inflation close to but below 2 percent.

"It is paramount that the rise in inflation does not lead to second-round effects and thereby give rise to broad-based inflationary pressures over the medium term," he said.

The inflation in the eurozone is expected to be between 2.0 percent and 2.6 percent in 2011 and between 1.0 percent and 2.4 percent in 2012, according to ECB. The ECB's monetary policy has not been changed since May 2009. However, markets are concerned with recent price rising in Europe and afraid that keeping borrowing cost at a too low level may accelerate the inflation and hamper the recovery.

Editor:Xiong Qu |Source: Xinhua

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