European Central Bank (ECB) president Jean-Claude Trichet said strong money and credit growth played a key role in the ECB's decision to start hiking interest rates last year.
Mr Trichet said many economists regarded the tightening of monetary policy as premature.
"In fact, at that time the signals coming from the economic analysis were not yet so strong. But the continued expansion of money and credit through the course of 2005 gave an intensifying indication of increasing risks to medium and long-term price stability," he told an ECB conference.
He said the strong economic growth figures recorded in the first half of 2006 showed that the ECB's move was well timed.
"Without our thorough monetary analysis, we could have been in danger of falling behind the curve," he said.
The ECB has raised rates steadily since last December. Its main rate now stands at 3.25 per cent compared with 2 per cent before the start of the tightening process.