The European Central Bank is aware of potential risks to price stability in the euro zone and will act if needed to keep inflation in check, ECB President Mr Jean-Claude Trichet said today.
While the central bank is ready to be patient before joining the Federal Reserve in ending years of cheap money, Mr Trichet in a testimony before the European Parliament's Economic and Monetary Affairs Committee, left little doubt the central bank would act if price increases became too rapid.
"The (ECB) Governing Council is still very vigilant about any development which might involve risks to price stability in the short, medium term," he said.
"Markets and indeed the public in general ... can remain confident that price stability, thanks to our vigilance, will be maintained in medium and long-term."
Mr Trichet said there was little evidence as yet of stronger underlying inflation pressures but noted several upward risks to the outlook for prices.
These included past increases in oil prices, which hit record highs in August.
He also said there was substantially more liquidity in the euro zone than was needed. Mr Trichet said the euro zone economic pick up had maintained its momentum and the conditions for recovery remained in place.
The ECB has held interest rates at 2 per cent for 15 months in a row to revive the sluggish euro zone economy, and it has not raised rates for over four years.