Fighting inflation will remain the top priority for the European Central Bank (ECB), despite growing pressure to slash its key rate to spur economic growth, analysts said.
The ECB Thursday reaffirmed its tough stance against inflation by leaving its benchmark lending rate unchanged at a six-year high of 4 percent amid surging oil and food prices.
Meanwhile, ECB chief Jean-Claude Trichet signaled a possible rate hike as early as next month amid growing concern among the world's leading central banks about the threat posed by surging consumer prices.
While some policymakers want to raise rates now, more see a case for a rate rise later, Trichet told the ECB's monthly news conference.
"We considered that it is not excluded, that after having carefully examined the situation, we could decide to move our rates a small amount in our next meeting in order to secure the solid anchoring of inflation expectations," he said.
According to figures released by European Union (EU) statistics bureau Eurostat, eurozone inflation has been increasing in the past months, remaining well above the 2 percent ceiling preferred by the ECB to maintain price stability.
Annual inflation in the eurozone rebounded to 3.6 percent in May after a short retreat in April, the highest since the Frankfurt-based ECB 12 years ago started collecting inflation data for the countries that began to use the euro in 1999.
Trichet said at the bloc's 10th anniversary that "the challenges lying ahead for the monetary union will be numerous and demanding."
Analysts said that in the face of rising inflation, the ECB has long held price stability to be its top priority, while the U.S. Federal Reserve and the Bank of England have both lowered borrowing costs this year to boost growth.
"The ECB has always taken firm and timely action in its monetary policy. There is no place for complacency," Trichet said.
He said price stability is a prerequisite for financial stability, growth and jobs, and the ECB will stick to its primary mandate to maintain price stability.
Slovenian Finance Minister Andrej Bajuk, whose government holds the rotating European Union presidency, told reporters that inflation is of course "a matter of concern for all of us."
ECB council member Klaus Liebscher said, "We will do everything to make sure that inflation is receding and will take all measures to fulfill our mandate in such a way that no inflationary expectations are building up."
However, economists said like many other regions, the EU had faced a dilemma over how to tackle rising inflation when the growth outlook had been rendered uncertain.
The eurozone economy is currently facing increasing downside risks from the financial turmoil, surging oil prices and the marked economic slowdown in the United States.
The ECB has faced political pressure to ease its monetary policy in the face of weakening growth in the eurozone.
Analysts said the rate hike would lead to higher risks amid the EU's economic slowdown.
Italy and Spain are on the verge of economic sluggishness while France is also facing a similar difficulty and its president, Nicolas Sarkozy, called on the ECB to reduce its interest rates to stimulate economic growth.
"The Governing Council is monitoring very closely all developments. It is in a state of heightened alertness," Trichet said.
Source: Xinhua
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