The European Central Bank (ECB) could raise interest rates again, but they are close to their peak, Spain's Economy Minister said today.
"The fundamental rise upwards in rates is near to ending. We think there could remain certain room for an additional increase, but we're practically at the point where they stabilise and could even start to fall," Mr Pedro Solbes said.
Last week, Mr Solbes said the global liquidity squeeze had created uncertainty and a loss of confidence in the Spanish economy and cast doubts over growth forecasts for 2007 and 2008.
He struck a more optimistic tone today and said the global credit squeeze would not fundamentally change the situation of the Spanish economy. "We are magnificently prepared," Mr Solbes said of the health of Spain's financial system and economy.
The credit crunch has its origins in the US subprime mortgage sector, where home loans made to borrowers with poor credit histories were repackaged and sold on as asset-backed securities to institutional investors.
The risk of mass defaults in the US has prompted banks to curb lending to each other as they strive to calculate exposures to soured loans, forcing the world's major central banks to inject emergency funds into the global financial system.