European Central Bank President Mario Draghi said policy makers have the tools available to arrest upside inflation risks if needed as the euro-area economy shows signs of stabilizing.
“All the necessary tools are available to address upside risks to price stability in a firm and timely manner,” Draghi said at a press conference in Frankfurt after the ECB held its benchmark rate at a record low of 1 percent today. While the ECB expects a moderate recovery this year, the economic outlook remains subject to downside risks, he said.
The ECB is balancing the threat of inflation in Germany, Europe’s largest economy, against the need to fight the sovereign debt crisis. While nations from Greece to Spain are battling recessions and record unemployment, workers in Germany are winning some of the biggest pay increases in 20 years.
Euro-area inflation will remain above the ECB’s 2 percent limit this year, Draghi said.
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