European Central Bank chief economist Mr Otmar Issing has warned that current low world rates of inflation should not lure decision-makers into a false sense of security and urged constant vigilance.

Mr Issing noted in a speech that the world economy was now in a phase of historically low inflation levels, with most industrial nations either enjoying price stability or inflation significantly below the average in the last three decades.

But he stressed that talking about the "death of inflation" was premature and warned about ignoring risks to price stability.

"History should have taught us that currency purchasing power is always at risk at any given moment," Mr Issing said.

"Vigilance should not be confused with unfounded nervousness. The monetary policy has to look ahead and it has to confront risks to price stability in a timely manner," Mr Issing added.

He said it was the ECB's mission to ensure that the euro remained a good and stable currency - a necessary condition for further European integration and the success of the monetary union.

Mr Issing, who was speaking a day after the ECB raised its interest rates by a quarter point, lifting its key refinancing rate to 3.50 per cent, made no direct reference to the latest rate move or the further monetary policy outlook.

The ECB justified its third rate rise in five months by emphasising the need to counter mounting inflationary risks.