(AFP) – Jan 5, 2008
BERLIN (AFP) — European Central Bank President Jean-Claude Trichet said Saturday that the bank was ready to act to control inflation -- five days ahead of an ECB decision on whether to hike eurozone interest rates.
"The ECB's governing council stands ready to counter upside risks to price stability, in line with its mandate," the French bank chief told a meeting of Germany's centre-right Christian Democratic Union (CDU) party in Wiesbaden.
"The governing council has decided to continue to pay great attention to financial market developments," he added, according to a copy of his speech on the ECB website.
Trichet, who will preside over the first meeting of the ECB governors this year on Thursday, added that "looking ahead, the inflation rate is expected to remain significantly above two percent in the near future, and it is likely to moderate only gradually in the course of 2008."
Inflation hit three percent in the eurozone in November, well above the ECB target figure of just under two percent, and the bank fears that it could contaminate the rest of the economy -- notably via higher salary settlements, which it calls "second-round effects."
With this in mind, the president repeated word for word what he said in December's monthly report from the bank: "By acting in a firm and timely manner ( ... ), the governing council will ensure that such second-round effects and risks to price stability over the medium term do not materialise."
At its previous meeting in December, the ECB decided to leave its principal rate unchanged at four percent.
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