The head of the European Central Bank has made a strong appeal to Governments to keep inflation down.
Speaking to reporters after the bank had left its main interest rate on hold at 4%, Jean-Claude Trichet said that taking action on inflation remained the bank's 'highest priority'.
The ECB president revealed that the bank discussed the 'pros and cons' of increasing interest rates today before deciding to leave rates unchanged. He also said the ECB 'remains prepared to act pre-emptively' against the impact on prices of wage hikes, known as second round inflation.
Mr Trichet said the bank remained alert and was closely watching countries which were engaged in wage negotiations. He added the bank 'would not tolerate' countries adding to the cost of living in Europe.
He also warned that inflation in the euro zone would remain 'significantly' above 2% in the coming months and would moderate only gradually during this year.
Mr Trichet said that while the pace of euro zone growth slowed in the fourth quarter, the bank still expected the zone to expand at near its potential rate.
