The European Central Bank is in “strong vigilance” mode over inflation pressures, ECB President Jean-Claude Trichet has said. That is the Bank’s code words indicating an interest rate rise is likely next month.
There was no such hint from the Bank of England which held UK interest rates at a record low 0.5 percent for a 27th consecutive month; most economists do not expect rates to rise in Britain until the end of the year.
Trichet spoke as the euro zone inflation forecast for 2011 was raised 2.6% from its previous prediction of 2.3%.
The ECB president said: “Our monetary policy stance remains accommodative, lending support to economic activity. On balance risks to the outlook for price stability are on the upside, accordingly strong vigilance is warranted.”
The ECB’s main refinancing rate is currently 1.25 percent.
At the news conference to explain the Bank’s decision, Trichet was questioned repeatedly about Greece and said Athens must avoid any form of restructuring in tackling its debt crisis.
“We are not in favour of restructuring … and so forth. We exclude all concepts which would not be purely … without any elements of compulsion,” Trichet told a news conference. “We call for avoiding any credit event and selective default, say. And of course, default.”
In Greece employees of state-owned firms facing privatisation went on strike on Thursday.
Antonis Birbilis, the union leader for staff at Greek telecoms company OTE, pledged it would be renationalised. He said: “This (privatisation) is a crime and what comes around goes around, they’ll see at some point that our fight is just, and the state companies will again be owned by the Greek state.”
But despite the daily demonstrations against the austerity measures, the Greek government will have to privatise more, and cut more. Their recent efforts have been sharply criticised in the latest assessment from the European Union, the European Central Bank and the International Monetary Fund.