The European Central Bank is prepared to shift to a restrictive monetary policy if needed to keep inflation under control in an economy growing faster than expected, ECB Governing Council member Axel Weber said.
The ECB did not see rates as "appropriate" at this point, nor in line with price stability, Mr Weber told the Financial Timesnewspaper in an interview published today.
"What is pretty clear at the moment is that we are in a stronger than previously expected recovery," Mr Weber said.
"If necessary, we also have to move into a territory that is portrayed as restrictive, if that is needed to control to control inflation," he told the FT and its sister paper the FT Deutschland.
"The current cycle of interest rate hikes has not reached its end."
Markets have already priced in a quarter point ECB rate increase to 4 per cent on June 6th, roughly in the middle of a range that most analysts view as neither restrictive nor loose for the euro zone economy.
Mr Weber's comments, in his second interview published today, suggested that the Bundesbank president sees further tightening possible after that.
He also told the Boersen Zeitungthat even though euro zone inflation was under 2 per cent, he saw cyclical upside risks and high liquidity which means the ECB may have to be more restrictive.
Mr Weber told the FT economic data would determine the pace of rate moves ahead. The ECB had signalled "that now the degree of data dependence has increased in our monthly judgment of all incoming information," he said.
Against this backdrop, he noted that there are "first indications" of capacity constraints in parts of the euro economy and domestic pressures in general are replacing external factors as inflationary risks for the region.
ECB President Jean-Claude Trichet had noted capacity constraints in his news conference earlier this month.