Thursday May 15, 09:16 AM
ECB says inflation likely to remain high for 'protracted period'
FRANKFURT (Thomson Financial) - The European Central Bank said euro zone inflation is likely to remain high for a 'protracted period' but it still believes that the current level of interest rates will help bring inflation down eventually.
'Inflation rates are expected to remain high for a rather protracted period of time, before gradually declining again,' the ECB said in its May monthly bulletin.
Inflation has been above 3 percent for the past six months as a result of sharp rises in energy and food prices. It stood at 3.3 percent in April and is expected to remain significantly above 2 percent in the coming months and to moderate only gradually over the course of 2008, the ECB said.
It said its highest priority is the firm anchoring of medium to longer-term inflation expectations and it is strongly committed to preventing second-round inflation effects and the materialisation of upside risks to price stability over the medium term.
And, it said the current level of interest rates, which have been at 4.00 percent since last June, will help it achieve this.
'The Governing Council ... believes that the current monetary policy stance will contribute to achieving its objective,' it said.
The ECB said recent data point to moderate but ongoing real GDP growth in the euro zone, but uncertainty over the economic impact of the recent turmoil in financial markets remains high and risks to the growth outlook lie on the downside.
The bulletin editorial closely matches ECB President Jean-Claude Trichet's introductory statement to last week's ECB news conference.
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