European Central Bank President Jean-Claude Trichet called today for strong vigilance against renewed oil price pressures in the euro zone, upping his anti-inflation rhetoric after the ECB held interest rates steady.
Euro zone rates have been steady at 2 per cent since June 2003 in order to shore up economic recovery, but recent high oil prices, fast money supply growth and rising inflation have clouded the price stability outlook.
"Strong vigilance with regard to upside risks to price stability is warranted," Mr Trichet said after the ECB Governing Council met in Athens, one of two meetings a year held away from its Frankfurt headquarters.
This represents a hardening of Mr Trichet's position since September, when he said "particular vigilance" on price pressures was needed. Wage growth in some countries was a concern, though domestic price pressures remain contained overall, Mr Trichet said.
Economic growth could gradually pick up over the rest of the year, supported by global demand, he added.
Mr Trichet also said that the ECB would publish its opinion on proposed changes to Italian laws governing the country's national central bank after the news conference.
Reforms to the Bank of Italy were drawn up when disputes mounted in the Italian government over central bank governor Antonio Fazio's role in a bank takeover fight.
Critics charge he tried to thwart a Dutch bid for an Italian bank in favour of a family friend, and Italian prosecutors have opened a criminal investigation into Mr Fazio.
The ECB, ever guarding itself against political pressure, wants to ensure that the proposed reforms to the Bank of Italy statute do not violate central bank independence.
The reforms would limit the term for the next governor to 7 years from the current life appointment, ensure that banks which the central bank regulates do not hold a controlling stake in it, and require a governor to consult fellow directors more.
In the past month, Italian Prime Minister Silvio Berlusconi called on Mr Fazio to quit and Economy Minister Domenico Siniscalco resigned over Mr Fazio's refusal to relinquish his job-for-life.