Tags: ECBs Trichet Sees Short-Term Inflationary Pressures

ECB's Trichet Sees Short-Term Inflationary Pressures

Thursday, 13 Jan 2011 08:56 AM

The eurozone economy faces short-term inflationary pressures and although they should be contained in the long-term close scrutiny is warranted, European Central Bank President Jean-Claude Trichet said on Thursday.

Eurozone inflation jumped last month to 2.2 percent, the first time in two years it has risen above the central bank's target of just below 2 percent.

"We see evidence of short-term upward pressure on overall inflation, mainly owing to energy prices, which has not so far affected our assessment that price developments will remain in line with price stability over the policy-relevant horizon," Trichet told a news conference after the bank kept interest rates at a record low of 1 percent.

"At the same time, very close monitoring is warranted," he said.

Trichet added that latest data suggested the eurozone's recovery had momentum although a high degree of uncertainty persisted.

The decision to hold rates was correctly forecast by all economists polled by Reuters and keeps rates at the record low they have been at since May 2009.

There was little reaction in markets, with the euro and bund futures little changed.

Trichet also said current interest rates are appropriate and that inflation expectations "remain firmly anchored."

"The current monetary policy stance remains accommodative," Trichet said during a news conference.

Risks are still "slightly tilted to the downside" while uncertainty is high, he added.

Financial markets wonder whether the ECB can increase its bond purchases to support Portugal — the latest government under pressure in a crisis which policymakers want to halt before it reaches the much bigger Spanish economy.

The pressure on the ECB to buy bonds may be eased by Portugal's success in an auction of its benchmark 10-year bond on Wednesday, a similarly solid debt sale by Spain on Thursday and a call from the EU's top economic official for a stronger European financial safety net.

© 2017 Thomson/Reuters. All rights reserved.

 
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The eurozone economy faces short-term inflationary pressures and although they should be contained in the long-term close scrutiny is warranted, European Central Bank President Jean-Claude Trichet said on Thursday. Eurozone inflation jumped last month to 2.2 percent, the...
ECBs Trichet Sees Short-Term Inflationary Pressures
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2011-56-13
Thursday, 13 Jan 2011 08:56 AM
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