European Central Bank President Jean-Claude Trichet said economic growth will slow in the second quarter after its “resilient” performance in the first.
"I have always said that the second quarter would be less flattering, and that the second semester in comparison to the first semester would be slowing down," Mr Trichet told reporters in Vienna today.
While faster growth in the first three months of the year confirms the economy's "resilience," the ECB must remain "cautious and prudent," he said.
The ECB has kept its key interest rate at a six-year high of 4 per cent to fight inflation, insisting Europe's economy remains "sound" even after the US housing slump pushed up credit costs worldwide and prompted the Federal Reserve to slash borrowing costs.
Economic growth in the 15-nation euro region accelerated to 0.7 per cent in the first quarter from the fourth, the European Union said today, beating economists' forecasts.
"We are vindicated in our analysis of resilience, very significant resilience, in the first quarter," Mr Trichet said.
"And then we will see. Some kind of slowdown seems to be happening."
The euro, which rose today on the stronger-than-expected growth data, dipped after Mr Trichet's remarks. It traded at $1.55 at 1.50pm.
The ECB in March projected the euro-region economy will expand about 1.7 per cent this year and 1.8 per cent in 2009. Inflation may average around 2.9 per cent in 2008 before slowing to 2.1 per cent in 2009, the staff projections showed. The bank aims to keep inflation just below 2 per cent.
Bloomberg