The European Central Bank expressed heightened concern today about inflation risks from surging oil prices but expects price stability to return next year.
The ECB said inflation was likely to hold above the ECB's 2 per cent ceiling for the rest of this year and the early months of 2005 if oil prices stay at high levels as markets expect, the ECB said in its August monthly bulletin.
But it gave no signal that its long spell of steady interest rates is about to end, even as growth in the 12-nation euro area is broadening and major central banks worldwide are tightening the credit strings.
"Looking further ahead, there are no indications as yet of a build-up of stronger general inflationary pressures, the ECB said in its August monthly bulletin, which provided no fresh signals of when the central bank may shift from interest rates on hold.
The August bulletin is a first look into ECB thinking following its August 5th policy discussion, at which it left interest rates unchanged at their historic 2 per cent low for the 14th month in a row.
The ECB did not hold its usual news conference following that policy meeting, after which policymakers headed for a four-week summer break.