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Trichet sees inflation uptick late this year

BERLIN - Inflation rates are 'very low' in the euro zone but should rise towards the end of the year, European Central Bank President Jean-Claude Trichet said in a newspaper interview published on Wednesday.

Policymakers must remain alert to problems thrown up by the financial crisis, he added.

“The crisis is a continuing phenomenon. We must therefore remain constantly vigilant,” Trichet told the Sueddeutsche Zeitung.

He said annual inflation rates could turn negative in the coming months due to falling oil, energy and commodity prices.

“Towards the end of the year, inflation figures will rise again.

“Low inflation is good for purchasing power and evens out past price rises,” he said. “Inflation expectations are currently around 1.9 percent, in line with our definition (of price stability).”

Annual inflation in Germany, the euro zone’s largest economy, quickened slightly to 0.7 percent in April after hitting a 10-year low in March, preliminary figures released on Tuesday showed.

Germany’s Statistics Office pointed to a 16.5-percent annual rise in the cost of package holidays as behind the uptick, linking that to the Easter holiday falling in April as opposed to in March a year ago. Gas prices also rose on the year.

The ECB cut its main refinancing rate by 25 basis points on April 2 to a new all-time low of 1.25 percent, and analysts expect a further cut to 1.0 percent in May.