The European Central Bank's current monetary policy will help to maintain medium term price stability at this time of upside inflation risks and financial market tension, ECB President Jean-Claude Trichet said today.
Speaking after the ECB left rates at 4 per cent for the 10th month in a row, Mr Trichet said euro zone economic fundamentals were sound but he acknowledged that turmoil in financial markets was unusually high and tensions might last longer than initially expected.
Latest data "confirms our assessment of prevailing upside risks to price stability over the medium term," he told a news conference. "We emphasise that maintaining price stability in the medium term is our primary objective."
"Firm anchoring of medium to long term inflation expectations is of the highest priority to the Governing Council and there is certainly no room for complacency in this regard. We believe that the current monetary policy stance will contribute to achieving this objective."
Euro zone inflation hit a record 3.5 per cent in March, despite the dampening effect of the strong euro, which hit a fresh high against the dollar today as the US economy worsens and jitters persist on financial markets. It also reached a record level against sterling.
Mr Trichet was cautiously optimistic on euro zone growth. "The economic fundamentals of the euro area are sound," he said.
Data "continue to point to moderate but ongoing real GDP growth. However the level of uncertainty resulting from the turmoil in financial markets remains unusually high and tensions may last longer than initially expected," he said.