ECB head Trichet renews inflation warning

FRANKFURT - European Central Bank president Jean-Claude Trichet underscored the ECB's responsibility to control inflation in comments to appear on Thursday, responding indirectly to politicians' calls for the bank to broaden its focus on soaring prices.

By (AFP)

Published: Wed 2 Jul 2008, 4:19 PM

Last updated: Sun 5 Apr 2015, 12:40 PM

‘Central bankers have a heavy responsibility,’ Trichet reminded the German daily Die Zeit in an interview released in advance.

‘If we are not determined, there is a risk that inflation could explode.

‘If we act decisively, we can keep control of the situation.’

His remarks came after several European leaders called on the ECB to consider aspects other than inflation when it mulls changes to the eurozone's benchmark lending rate, which the bank is expected to raise to 4.25 percent on Thursday.

ECB policymakers will meet as eurozone inflation has reached a record 4.0 percent, undermining household confidence and threatining to spiral out of control if wage and other price increases follow the lead of soaring energy costs.

The bank aims to keep inflation just below 2.0 percent.

But French President Nicolas Sarkozy, Spanish Prime Minister Jose Luis Rodriguez Zapatero and German Finance Minister Peer Steinbrueck have all pressed the ECB in recent days to think about the impact that higher lending rates will have on business activity and consumer sentiment.

Trichet told Die Zeit the bank had to think about the middle and long-term and that it was ‘accountable to coming generations.’

He has said several times that ensuring price stability was the best way, in the bank's view, to lay a foundation for sustainable growth, and has warned against higher wages and prices chasing each other into an uncontrolled increase that would do more harm than higher interest rates.

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