Inflationary pressures are calm in the euro area, but dangers persist that prices will start climbing in the months ahead, the European Central Bank said today.
In its March monthly bulletin, the ECB said it will monitor these risks closely to make sure that its goal of price stability is not threatened in the medium term.
The editorial in the monthly bulletin was a close repeat of the ECB's March monetary policy statement when the Governing Council decided to leave its official refinancing rate at 2 per cent for the 21st month in a row.
"These interest rates are at historically low levels and are making an important contribution to the economic recovery. At the same time, upside risks to price stability over the medium term exist. These require continued vigilance on the part of the Governing Council," it said.
Although the ECB is increasingly warning of inflationary risks, seen as a way to prepare markets for a rate increase, a slowdown in growth in recent months has delayed any move.
Markets expect no ECB rate rise until later this year, especially after the central bank this month reduced its 2005 economic growth projection to a midpoint of 1.6 per cent from 1.9 per cent in forecasts published three months earlier.