European Central Bank President Jean-Claude Trichet said this morning the bank cannot relax in its battle to curb inflation.
"There is no place for complacency," Mr Trichet said in a speech in Brussels today. "Price stability in the medium term has to be" ensured. It's "a necessary condition to sustain economic growth, job creation and social cohesion."
The ECB has held its key rate at a six-year high of 4 per cent to damp inflation, which accelerated to the fastest pace in 16 years in March.
While the US Federal Reserve and the Bank of England have both lowered borrowing costs this year to shore up economic growth, the ECB has signaled concern about companies raising prices and unions pushing though bigger wage increases to compensate for the higher cost of living.
"The Governing Council is paying particularly close attention to wage negotiations in the euro area," Mr Trichet said. He added that central bank independence "key for monetary policy to be credible."
Bloomberg