Finance ministers, business and labour unions increased pressure on the European Central Bank today to refrain from hiking euro zone interest rates to fight inflation, telling the ECB it risked stifling economic recovery.
Ernest-Antoine Seilliere, the head of the UNICE group that represents business at European Union level, said he would tell ECB President Trichet so at a meeting later today that also involves trade unions.
Financial markets are increasingly convinced the ECB could raise its key interest rate - currently at a historic low of 2 per cent, half of US levels -- as soon as December.
The European Trade Union Confederation also made an appeal to the ECB to hold off. ETUC said it too was worried a rate rise would damage growth and believed there that was no risk of wages soaring and causing inflation to snowball as the ECB fears, arguing that wages had been modest for a decade. Several ministers renewed their appeals today.
ECB president Jean Claude Trichet did not comment himself on monetary policy but financial markets were set on the idea that a rate rise could come as early as the ECB meeting next month following a stream of recent comments from Trichet and other top ECB officials about their readiness to act at any time to keep a lid on inflation.
Yves Mersch, Luxembourg's member of the ECB's Governing Council, said the ECB and Trichet had made it clear at a news conference last Thursday that it was ready to take action at any time to keep inflation and expectations of inflation at bay.
"President Trichet has made everything perfectly clear. That is what I have said to everyone," Mersch told reporters.
The ECB wants to keep consumer price growth below, but close to 2 per cent.
Eurostat estimated the headline inflation rate in October of 2.5 per cent, down from 2.6 per cent in September, but still well above the ECB target. Growth in the euro zone is expected to hit a paltry 1.2-1.3 per cent this year, even if there is a pickup in the second half that has yet to show through in earnest.