ECB Governing Council member Axel Weber has said the European Central Bank must keep withdrawing monetary stimulus from the economy.
Weber told reporters in Davos, where he is attending the World Economic Forum, that an acceleration in euro zone money supply in December showed that upward risks still surrounded the inflation outlook.
In a separate interview with Bloomberg Television, he said the ECB would do whatever was needed to protect price stability, without tying itself to any set course. The ECB has raised rates by 1.5 points to 3.5% over the last 14 months in a bid to keep inflation in check.
Financial markets expect a further rise to 3.75% by March, and the ECB has done nothing to dissuade people from taking this view. By June, most analysts see a further rise to 4%.
Weber said rises in official interest rates were having less effect than in the past on the long-term market rates which drive investment decisions. 'That means that we have to continue on the path of withdrawing monetary stimulus,' he told Bloomberg TV.
Earlier, the ECB said growth of the euro zone money supply, which the bank monitors as a key gauge of future inflation, picked up last month, in another pointer to further rises in interest rates in the months ahead.
The euro zone's money supply grew by 9.7% in December, up from 9.3% in November.
The guardian of the euro closely monitors developments in the money supply when deciding the appropriate level of interest rates because it sees a link between the level of liquidity in the economy and future inflation.
The ECB calculates that the money supply needs to expand by an annual 4.5% to serve as a basis for non-inflationary economic growth. However, the M3 money supply - which includes current assets such as cash, overnight deposits, and other short-term deposits - has been growing much faster than that for a long time.
With current economic indicators rising and inflationary dangers also high as a result of higher oil prices, the ECB watches monetary developments and has used them as justification for its decision to raise its key interest rates six times so far since December 2005.
The bank last raised its key rates by 0.25 percentage points to 3.5% in December, and is expected to tighten monetary conditions again in the coming months.
