Trichet hints at rate rise as warns of threat of inflation

THE European Central Bank (ECB) is poised to raise interest rates even while the Eurozone is mired in a debt crisis, it hinted yesterday as it left rates on hold at their historic low of one per cent.

In his strongest words to date on the threat of surging inflation, ECB president Jean-Claude Trichet warned of “evidence of short-term upward pressure on overall inflation”. He added: “We are permanently alert. We are never-pre-committed not to move interest rates.”

Trichet emphasised that the ECB raised rates at the height of the financial crisis in July 2008, in a bid to stress that the central bank was prepared to raise rates even in uncertain times.

Trichet’s comments come amid ongoing concerns that without ultra-low interest rates, Portugal, Spain, Italy and Belgium could be forced to join Ireland and Greece in needing an EU bailout.