European Central Bank signals further rate hike

European Central Bank President Jean-Claude Trichet on Thursday pledged "strong vigilance" against inflation which was widely believed to be a sign of further rise in interest rate.

"We are in a posture of strong vigilance today," said Tricket at a press conference after a meeting of the ECB's governing council.

At previous meetings this year, Trichet's use of the word " vigilance" has signaled a likely increase in interest rates, which is the bank's key tool to curb inflation.

The Frankfurt-based bank, which sets rates for the 12 countries using the euro currency and their collective 9.8 trillion dollars (7.7 trillion euros) economy, left its key refinancing rate unchanged Thursday at three percent as expected.

On Aug. 3, the bank raised the refinancing rate to three percent from 2.75 percent. The bank will meet again on Oct. 5 in Paris for its rate decision.

However, Trichet stopped short of promising an increase outright.

"We do not pre-commit in any respect...We do what is necessary in our opinion to counter inflationary risks," Trichet told reporters.

Statistics show that inflation rate edged down to 2.3 percent in August from 2.4 percent in July, but it still exceeded the ECB's ceiling of about two percent.

The bank sees growth in the 12-nation euro zone at 2.5 percent for this year, up from a previous estimate of 2.1 percent.

Source: Xinhua