European Central Bank chief Jean-Claude Trichet has said the euro zone remains vulnerable to increased inflationary pressures.
He was speaking after the bank left its main interest rate unchanged at 4%, as expected, at its regular monthly meeting in Vienna.
Trichet told reporters that, given the current financial market volatility, the ECB would move cautiously on further interest rate rises and would wait for more information before deciding whether to act.
The information currently available confirmed that 'the outlook for price stability over the medium term is subject to upside risks,' Trichet said, adding that the bank stood ready to move against these risks.
The ECB has raised its key rate eight times since December 2005 and, until recently, had been widely expected to tighten monetary policy again this autumn.
But with the euro currently near record highs and the world's financial markets still feeling the effects of a global banking crisis, the ECB has held off from raising rates further for the time being. Euro zone politicians are becoming increasingly vocal in their calls for the ECB to actually cut interest rates to help ease credit conditions.
