The head of the European Central Bank has warned that mounting concerns over rising prices across the world could provoke policymakers to tighten economic policy despite the uneven condition of the eurozone, according to The Wall Street Journal. In a recent interview, ECB President Jean-Claude Trichet said the rising inflationary pressure could necessitate higher interest rates, even as peripheral eurozone economies struggle to regain a solid footing under the weight of sovereign debt burdens. The warning comes as inflation is spurred on by rapid inflation in developing countries like China and Brazil.
Trichet said that all financial leaders around the world had a role in containing price pressure “coming from commodities,” urging for the prevention of “second-round affects” on local economies. Inflation in the eurozone jumped above the 2% target set by the central bank in December for the first time in two years, but the ECB is faced with the dilemma of trying to cool inflation without hampering the weak recovery in countries like Greece and Ireland. Nonetheless, Trichet insisted, “All countries in the euro area have an immense stake in the solid anchoring of inflation expectations.”
