The European Central Bank has said inflation is still a threat to the euro zone economy, again hinting that it might have to raise interest rates further.
Even though the ECB has raised borrowing costs seven times in the past 16 months, 'risks to the medium-term outlook for price stability remain on the upside,' it wrote in its April monthly bulletin, published this morning.
The risks related in particular to 'stronger than currently expected wage developments in a context of ongoing robust growth in employment and economic activity'.
Money supply growth, which the ECB sees as a gauge of future inflation, was also very strong, the bank said.
Last week, the ECB held its key interest rate steady, as expected, at 3.75%, but ECB chief Jean-Claude Trichet signalled the bank was ready to raise borrowing costs again in June. The prospect of higher interest rates has sent the euro close to record highs against the dollar this week.
