The eurozone faces a number of upward risks to inflation, European Central Bank President Jean-Claude Trichet said in hawkish testimony on Tuesday that signalled the ECB has a slight bias toward raising interest rates. But his remarks, two days before the ECB's rate-setting Governing Council decides on interest rates, gave no hint that the ECB was about to abandon its 18-month-old policy of steady rates any time soon.
"There are a number of upward risks to price stability," Trichet told the Economic and Monetary Affairs Committee of the European Parliament.
"Such risks are mainly associated with oil price developments, uncertainty regarding future increases in interest, taxes and administrative prices, and potential second-round effects stemming from wage and price-setting behaviour."
Analysts said Trichet, by stressing he was more concerned about the inflationary dangers than risks to growth, was merely signalling the ECB's vigilance on inflation risks.
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