There are a number of risks to the inflationary outlook, European Central Bank (ECB) President Mr Jean-Claude Trichet said yesterday in remarks that signalled the ECB is likely to keep to its slight bias toward eventually raising interest rates.

His remarks sent the euro to a fresh record high at $1.3334 against the dollar as dealers saw no hint that the ECB would try to stem the currency's rapid advance against the dollar by leaning more toward neutral or lower interest rates.

While Mr Trichet said that high oil prices have slowed the region's growth dynamics, he said the euro zone recovery continues, suggesting that the ECB Governing Council when it meets tomorrow will adhere to its 18-month-old policy of holding its rates steady at 2 per cent.

But by underlining inflationary risks, Mr Trichet kept the tilt toward raising rates sometime in the future in place, though no such rate hike is expected until later next year.

"There are a number of upward risks to price stability. Such risks are mainly associated with oil price developments, uncertainty regarding the future increases in indirect taxes and administrative prices and potential second round effects stemming from wage payments and price-setting behaviour," Mr Trichet told the European Parliament economic and monetary affairs committee.

"In this respect it is essential that inflationary expectations remain solidly anchored to our definition of price stability and are not affected by current upward movements in inflation."

As for recovery, Mr Trichet said that "growth dynamics moderated" in the third quarter due to high oil costs and that uncertainties lie ahead. - (Reuters)