The European Central Bank went on the offensive today to defend its first interest rate rise in five years, with policymakers reassuring consumers they are not planning to strangle economic growth with a series of increases.
ECB President Jean-Claude Trichet said the rise would promote low inflation, in line with the bank's mandate, and in turn that would help economic growth and employment.
Jean-Claude Trichet
The ECB ended two-and-a-half years of record cheap credit yesterday, lifting its benchmark refinancing rate by 0.25 per centage points to 2.25 per cent and winning a frosty response from politicians and business groups.
"By ensuring price stability, which is what we have been asked for, it means that market interest rates in the medium and long term will stay at a low level, which is good for growth and employment," Mr Trichet said, according to a preview of an interview with EuroNews TV to be broadcast later today.
Christian Noyer, who heads the Bank of France, tried to calm worries about further rate moves. "We did what we thought was necessary, so we have nothing else (up our sleeves) today," he told Europe 1 radio. "But we don't know how we will assess the situation in the coming months."
Bundesbank President Axel Weber told German television that euro zone rates remain at a very low level, while Austria's Klaus Liebscher said the ECB did not want to lock itself into any course of action. "We definitely did not want to send a signal for further rate movements," he told the Austrian Press Agency.
Jean-Claude Juncker, who chairs the Eurogroup of euro zone finance ministers, agreed that the small hike would not hurt the euro zone economy, but made it clear he did not think further rises were necessary.
Mr Juncker said there had been an exchange of views on the inflation outlook as he pushed the finance ministers' case for rates to remain on hold at Thursday's ECB meeting.
His comments follow warnings from German Finance Minister Peer Steinbrueck, who said on Thursday the economy could cope with one small rise but no more, while Austria's Karl-Heinz Grasser said the hike would not help either inflation or growth.