The European Central Bank (ECB) tried Thursday to balance anti-inflation and growth by lifting the benchmark interest rate by 0.25 percentage points to 4.25 percent for the first time since last June.
The act of the ECB was done in a context that inflation rate of the euro zone have risen to 4 percent last month, double the bank's medium-term goal.
Central Bank President Jean- Claude Trichet said anti-inflation was their "mandate," and will do whatever is necessary to combat inflation.
Besides, Trichet tried to play down the prospects of further interest-rate increases saying the quarter-point move Thursday will help bring inflation back below 2 percent. Instead, markets are betting on rates hitting 4.5 percent by the year-end.
Dario Perkins, an economist at ABN Amro NV doubt Trichet's words for saying further moves "depend on what happens to inflation and, more importantly, inflation expectations."
Trichet also acknowledged the downside risks for economic growth and said the economic growth in the second quarter of 2008 will likely not be so strong as the previous quarter, and Quarter three would not be very flattering as well.
However, Trichet emphasized that GDP growth still remains dynamic over the medium term.
Trichet's comments reflect the balance he must strike between insisting on the ECB's mandate and acknowledging the growth concerns of some euro-region countries that have been hurt by a real-estate bust.
France and Spain have already said the ECB may not be paying enough attention to the growth outlook.
Source:Xinhua
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