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ECB says no profound inflation threat

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ECB says no profound inflation threat

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As expected the European Central Bank has kept interest rates unchanged at a record low one percent and does not seem too worried about inflation which last month accelerated to 2.4 percent in the euro zone.

After the policymakers’ monthly meeting ECB president Jean Claude Trichet said inflation is likely to climb further and could exceed the Bank’s target for most of the year but he added it does not yet pose a threat to price stability in the medium-term.

Trichet said: “We continue to see evidence of short term upward pressures on overall inflation mainly owing to energy and commodity prices. This has not so far affected our assessment that price developments will remain in line with price stability over the policy relevant horizon.”

Because of oil and food costing more Trichet said inflation is likely to stay slightly above the ECB’s two percent target for most of this year, before moderating again in 2012.