Trichet sounds inflation warning

10 July 2008

European Central Bank (ECB) chief Jean-Claude Trichet has warned governments that inflation in the euro-zone could rise still further over months to come.

The banker's comments followed the ECB's raising of interest rates to 4.25 per cent in a bid to counter price rises - despite member states continuing to face a credit crunch-induced economic slowdown.

Speaking in the European Parliament, Mr Trichet also said that national ministers should not allow big wage hikes for workers in order to help them meet rising fuel costs - as this could cause a price spiral.

"[The ECB] is strongly concerned that price and wage-setting behavior could add to inflationary pressures," he commented. "First signs are already emerging in some regions of the euro area."

He added: "Price stability paves the way for sustainable growth and job creation…the most vulnerable and poorest of our fellow citizens are those that would suffer most [from inflation]."

This month, the ECB raised rates to 4.25 per cent, following months of rate holds.

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