The euro zone economy is less vulnerable to financial crisis than the United States, and its short-term growth outlook is better, European Central Bank Governing Council member Christian Noyer said today.
But the financial turmoil makes it more important than ever to keep inflation expectations under control, which is a precondition for the ECB to consider cutting interest rates, Mr Noyer said in a speech.
ECB Executive Board member Lorenzo Bini Smaghi made a similar point in an Italian newspaper interview published today, and added that the factors driving up the cost of living were transient and mostly outside the ECB's control.
"Decisions (on rates) are based on inflation expectations, not past inflation," he told Il Corriere della Sera. "This is why the current rise in prices must be a one-off and must not trigger a spiral between prices and costs."
Euro zone inflation hit 3.5 per cent in March, its highest level since the single currency's launch.
The ECB's goal is to keep inflation just below 2 per cent over the medium term, and policymakers have frequently said that controlling inflation expectations, which affect wage demands and price-setting, is a major tool for achieving this.
Since last June, the ECB has kept rates unchanged at 4 per cent.