The European Central Bank (ECB) is prepared to act pre-emptively against "second round" price risks, President Jean-Claude Trichet said this afternoon.
Latest information showed strong short-term upward pressure on euro zone inflation, he said after the ECB left interest rates at 4 per cent. He added that the Governing Council's assessment of upside price risks had been fully confirmed.
"The Governing Council remains prepared to act preemptively so that second round effects and upside risks to price stability over the medium term do not materialise and consequently medium term and long term inflation expectations remain firmly anchored in line with price stability."
"Such anchoring is of the highest priority to the Governing Council," he said, stressing the ECB's mandate to get annual inflation under 2 per cent from 3.1 per cent in December.
The ECB has repeatedly warned of second round effects, particularly from workers raising their wage demands to compensate for high energy and food costs.
Fundamentals of the euro zone economy were sound, but there still uncertainty about impact of financial market turmoil on growth, Mr Trichet said.