ECB hints rates may rise next month

BULLETIN: The European Central Bank (ECB) has expressed fresh concern about inflation in the euro zone, hinting that interest…

BULLETIN: The European Central Bank (ECB) has expressed fresh concern about inflation in the euro zone, hinting that interest rates could rise as early as next month.

The ECB's monthly bulletin for May, which was published in Frankfurt yesterday, is optimistic about economic growth and says euro-zone inflation will slow down in the coming months.

But unlike recent bulletins and a statement by the ECB president, Mr Wim Duisenberg, last week, yesterday's report does not predict that inflation will fall below 2 per cent this year.

"On the basis of current information, it can be still expected that annual inflation will decline further in the coming months," the bulletin said.

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Inflation in the euro zone fell to about 2.2 per cent in April from 2.5 per cent in March, but it has not been below the ECB's self-imposed limit of 2 per cent for two years.

In a speech in the German city of Aachen yesterday, Mr Duisenberg repeated the ECB's primary commitment to preserving price stability in the euro zone.

Accepting the annual Charlemagne Prize, which was awarded to the euro itself, the ECB president said that fighting inflation was the best contribution the ECB could make to the economy.

Denis Staunton

Denis Staunton

Denis Staunton is China Correspondent of The Irish Times