ECB bankers soothe inflation fears


Euro zone central bankers today held out hope the region's inflation will return below its two per cent ceiling and sought to soothe fears that Europe may face a mix of disappointing growth and rising prices.

Spanish central bank chief and European Central Bank council member Mr Jaime Caruana said the return of euro zone inflation below the ECB's self-defined cap was possible despite setbacks earlier this year.

"It is still possible for the euro zone inflation rate to come below the two percent target in the next few months...but that will depend to a large extent on the direction of oil prices", he told a parliamentary committee in Madrid.

Mr Caruana's comments followed remarks from ECB Vice President Mr Christian Noyer, who played down the risk that a combination of faltering growth and increasing inflation pressures could emerge.

"I can hardly imagine a situation where growth collapses and pressure on prices still increases," Mr Noyer, whose term expires at the end of this month, told German Handelsblattdaily in an interview.

Euro zone inflation eased to an estimated 2.2 per cent in April from 2.5 per cent in March, but was last below the ECB's 2.0 per cent ceiling in May 2000.