Trichet to Europe: Hold Line on Prices; Tough Talk: European Central Bank President Jean-Claude Trichet

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Byline: Joe Downes

EUROPES top banker said yesterday that the odds were shortening on aninterest rate rise unless the eurozone gets to grips with inflation.

Jean-Claude Trichet said the struggle against rising prices was the highestpriority of the European Central Bank And he warned it would be prepared to actpre-emptively if things did not improve.

Trichet was speaking to reporters after he and his fellow bank directorsdecided to keep the zones key regulatory interest rate at 4pc.

The bank president was at pains to make clear the decision had been a close-runthing. The directors, he said, had discussed the pros and cons of raisingrates, but there had been no discussion about cutting them.

Asked if the ECB had a tightening bias in its monetary policy stance, Trichetsaid the ECBs stance is certainly not neutral.

The concern at the bank reflects that fact that eurozone inflation is currentlyrunning at 3.1pc, well ahead of its preferred level of under but close to 2pc.

Trichet emphasised that the ECB would not tolerate any spiralling of wages andprices in response to the recent surge in food and oil prices. He said he wassending a strong message not to base wage and price increases on the recentjump in headline inflation.

Mr Trichet added that the bank would not tolerate countries adding to the costof living in Europe through current wage negotiations. He also said that theaim was to ensure that euro-zone inflation returned to its target level oncethe current hump in headline inflation is past. …