Expectations that the European Central Bank (ECB) will raise interest rates in June are broadly in line with the central bank's view, ECB chief economist Otmar Issing was quoted today as saying.
Market views are "more in line with our assessment," Mr Issing said in an interview with the International Herald Tribune.
Earlier this month the ECB knocked down market pricing for an ECB rate rise in May, but President Jean-Claude Trichet signalled that an increase in the benchmark rate, currently at 2.5 per cent, in June was likely.
In the interview, Mr Issing expressed concern about the latest surge in crude oil prices and said he was watching trade union negotiations closely to see whether wage settlements build in the higher energy costs and price increases.
Brent crude held close to its record high of $74 a barrel today. Mr Issing, who heads the economics department at the ECB which prepares its staff forecasts, said that if this persists it would affect the bank's inflation outlook.
The ECB is due to update its economic projections in June. Currently, it puts inflation for this year and next in the 12-nation euro zone at a mid-point of 2.2 per cent, assuming crude oil around $66 a barrel.
Mr Issing said that if second-round effects emerge, where higher oil costs are passed on to consumers through wages and prices, the ECB "would have to act decisively".