The head of the European Central Bank has said it will continue to 'monitor very closely' inflation risks in the euro zone.
Jean-Claude Trichet was speaking to reporters after the bank decided to raise interest rates by a quarter-point to 1.5%, in an effort to curb inflationary pressures in the euro zone.
Economists had said the use of the phrase 'monitor very closely' would signal that another interest rate increase was likely this year. But Mr Trichet repeated that the ECB never pre-committed to interest rate movements.
Asked about the effect of an interest rate increase on Ireland and other struggling euro zone countries, Mr Trichet said the ECB had a responsibility to deliver price stability to 331 million people in the euro zone, and Ireland benefited as much as any other country from low inflation.
Also on Ireland, he said the latest figures showed that its 'results are going in the right direction'.
Trichet said that a decision on how to continue providing liquidity to banks in Greece, Ireland and Portugal is a 'work in progress'.
It was not immediately clear if this referred to something along the lines of a medium-term funding arrangement the Irish government has been looking for to replace the ad hoc fortnightly liquidity funding for the Irish banking sector.
Separately in an interview with RTÉ News, Trichet said that there is no possibility of arranging a medium-term lending facility to provide liquidity for the Irish banking sector.
Euro zone inflation remained at 2.7% in June, softer than expected but well above the ECB's target of just under 2%.
The ECB had also increased its rates in April, becoming the first major central bank to lift interest rates after the intensification of the financial crisis.
Meanwhile, Trichet said the oligopoly-type structure of credit rating agencies is undesirable. He added that the ECB disapproved of a decision by Moody's rating agency to slash its ratings on indebted Portugal to junk status. That decision rattled financial markets.
The ECB has pledged to keep liquidity flowing to euro zone banks that need it, and Trichet today said Portuguese debt would be accepted by the ECB as collateral for now, come what may.
'We have decided to suspend the application of the minimum credit rating threshold ... for the purpose of Eurosystem credit operations in the case of marketable debt instruments issued or guaranteed by the Portuguese government,' he said, adding that this suspension would be maintained until further notice.
