The European Central Bank (ECB) kept up its warnings about price risks to the euro zone economy on Friday as new data set the stage for more inflationary worries.
ECB governing council member Nout Wellink was the latest ECB official to hint at a rise in euro zone interest rates if high oil costs tip over into upward pressure on wages and the prices that companies charge.
ECB policymakers were becoming "increasingly concerned about inflation", he said. He was also quoted as saying "words aren't enough" all the time for central banks.
"When the moment of action comes I can't tell, it really depends on oil prices," he said. Interest rate-sensitive markets took fright at the hawkish tone, and euro zone interest rates futures fell to their lowest level in over six months on the back of the remarks.
Latest money supply data added to the cautious tone on markets while a first estimate of inflation in October showed a fall from September - but by less than economists had forecast.
Figures from the ECB showed that money supply M3, one indicator of possible future inflationary trends, was growing at 8.5 per cent in September, above earlier forecasts in the market.
The EU's statistics agency reported euro zone inflation fell to an annual rate of 2.5 per cent in October, but economists polled by Reuters had expected the rate to ease to 2.4 per cent in year-on-year terms from 2.6 per cent in September.
Analysts said the strong money data provided more evidence to back up the ECB's concerns on inflation. The ECB has held its key interest rate at a record-low 2 per cent since June 2003.