European Central Bank president Jean-Claude Trichet has sent a clear signal that interest rate rises are in the pipeline for next month.
He told reporters in Dublin that 'strong vigilance' was required with regard to inflationary risks in the euro zone economy. The term 'strong vigilance' is seen by the financial markets as Trichet's codeword for signalling an imminent rise in rates.
At each meeting before a rate increase, the ECB chief has always said that the bank would remain 'vigilant' or 'strongly vigilant' on inflationary risks.
Earlier, at the ECB's regular monthly policy-setting meeting at Dublin Castle, the bank held its key rate steady at 3.75%.
Trichet also said he was 'happy' that the French president-elect, Nicolas Sarkozy, was no longer calling for any changes in the ECB's mandate.
'A change in our mandate is no longer being called for. I'm happy about that,' Trichet said when questioned about demands by Sarkozy during the presidential election campaign that the ECB be made more answerable to eurozone politicians.
Interest rates were last raised in March. The ECB has raised euro zone borrowing costs a total seven times since December 2005, each time by a quarter of a percentage point, in a bid to keep inflation in the euro zone in check.
The ECB press conference can be viewed at www.ecb.int .
