The European Central Bank (ECB)will not hesitate to raise rates to fend off a broader rise in inflation, board member Juergen Stark said in an interview yesterday.

Mr Stark denied the ECB faced a dilemma in upward pressure on inflation at the same time as a potential hit to growth from financial market turbulence, and said its mandate to preserve price stability was clear.

"It's also clear that we won't hesitate to act before we get to second-round effects," he told Germany's Boersen-Zeitung newspaper, signalling the prospect of a rate cut remains on the back burner for now at least.

Mr Stark said the ECB had stepped up to the challenge of keeping markets functioning in the wake of the US mortgage crisis without blurring the line separating its monetary policy.

The ECB has defied a trend among other major central banks to cut interest rates in the wake of the turmoil, keeping its benchmark steady at 4 per cent. Yesterday however it bolstered its joint bid with other central banks to flush money markets with cash heading into the turn of the year, and traders said this should ease pressure on market interest rates, which continue to fall from seven-year peaks earlier this month.

Mr Stark said it could take "months or quarters" before markets fully settled and a new equilibrium was only possible once banks had disclosed all losses from risky investments.

In the US, the most likely scenario was a soft landing, but the euro zone would not be immune from a sustained hit to investor confidence, should this emerge.

For now though, the ECB was focused on inflation, which hit a 6½-year high of 3.1 per cent in November. He said inflation rates in the 13-nation region should decline towards the ECB's ceiling of 2 per cent, or lower, during 2008 but there were grave risks.

"This scenario is surrounded by significant dangers," he said, noting that commodity prices might not perform as the ECB expected.