European Central Bank president Jean-Claude Trichet said this afternoon that risks to euro zone economic growth lay to the downside.
But after the ECB left interest rates unchanged at 4 per cent, as expected, Mr Trichet said inflation risks were on the upside and monetary policy was ready to counter these risks.
"On balance, risks to the outlook for growth are judged to lie on the downside," he told a news conference.
"These downside risks relate mainly to the potential for a broader impact from the ongoing reappraisal of risk in financial markets on confidence and financing conditions, concerns about protectionist pressures and possible disorderly developments owing to global imbalances, as well as further oil and commodity price rises."
Mr Trichet dropped his description of recent months that monetary policy remained on the accommodative side.
Instead, he said: "With money and credit growth vigorous in the euro area, our monetary policy stands ready to counter upside risks to price stability."
Mr Trichet added: "The Governing Council will monitor very closely all developments."
Analysts had expected Mr Trichet to soften the ECB's bias towards raising interest rates again, which most now see as unlikely. Some even predict the next move will be a cut.