The European Central Bank left its main interest rate at a record low of 1% today though a heavy cloud of inflation loomed over the 17-nation euro zone.
ECB president Jean-Claude Trichet told reporters this afternoon that the bank continued to see evidence of short-term pressures on prices, mainly due to commodity prices, but this had not so far affected its assessment of long-term inflation.
He repeated his comments of last month, saying that the ECB had to remain alert on inflation. He said the bank had the reputation of always doing what was necessary to deliver price stability.
In January, euro zone inflation jumped to 2.4%, above the ECB target of below but close to 2%. The latest reading of producer prices released yesterday showed they had leapt by 5.3% on an annual basis, the sharpest increase since October 2008.
Although producers' costs were undoubtedly affected in large part by energy prices - crude oil has spiked to $103 a barrel on fears over knock-on effects of the turmoil in Egypt - the trend in euro zone inflation is also clearly upwards.
While economists do not expect an ECB rate hike for several months, the rise in inflation had sparked speculation that a rise could come earlier than previously expected.
Trichet also said the ECB's government bond buying programme to prop up the debt of weaker euro zone members was 'ongoing'.
The ECB halted its bond purchases for the first time since October last week, reflecting a calmer recent tone to debt markets and amid growing talk about the euro zone's rescue fund, the EFSF, taking over the role in future.
Reiterating the stance of previous comments, Trichet said the rescue fund should be 'as flexible as possible and as effective as possible in terms of magnitude'.
