The European Central Bank has expressed concern about possible inflationary dangers, which might lead it to raise interest rates in the euro zone.
The ECB's chief economist Otmar Issing said in a newspaper interview that a pick-up in inflation, driven by high oil prices, is a cause of 'some concern' even if were not yet 'dramatic'.
Annual inflation in the 12 countries that share the euro shot up to 2.5% in May from 2% in April. The ECB defines price stability as price increases of close to but below 2% on 12-month basis.
Issing warned of possible 'second-round' effects of inflation, meaning that rising oil prices could feed through into other parts of the economy, triggering an inflation spiral. Such a spiral could lead the ECB to raise its key interest rates, currently fixed at 2%.
Bundesbank president Axel Weber expressed similar concerns. Speaking to reporters on the sidelines of a conference in Frankfurt, Weber said he was confident that the recent rise in inflation and inflation expectations would prove only temporary and that inflationary pressures would recede.
But Weber added that if higher inflation expectations led to secondary effects such as rising wages, 'that would be worrying'.
* Mr Issing also warned that attempts by some governments to change the bank's mandate to focus more on growth were doomed to fail.
France and Italy have recently suggested that the ECB's overriding mandate - to safeguard price stability in the euro zone - is too restrictive and that the ECB should focus more on boosting growth and employment.
