European Central Bank president Jean-Claude Trichet has hinted that a rise in euro zone interest rates is not on the cards in the immediate future, despite a pick-up in inflation as a result of higher oil prices.
'It is important for the ECB to clearly communicate what monetary policy can and cannot achieve,' Trichet told journalists. He said interest rate changes could not offset 'short-term changes' in the inflation rate caused by economic shocks such as sharp oil price increases.
For a number of months now, euro zone inflation has been higher than the ECB's target of 'close to but just below 2%'. It picked up to 2.4% in December.
But the acceleration has been largely due to surging oil prices. Euro zone have remained unchanged at 2% since June 2003.
Many ECB watchers believe the euro bank will wait at least until the autumn before tightening monetary policy so as not to choke off weak economic growth in the single currency area. Trichet implied that market expectations regarding future ECB rate moves were correct.
