Eurozone: euro growth ‘alarming’
The ECB has held interest rates at 4% as concerns about inflation persist…
High food and oil prices have pushed up the cost of everyday essentials such as bread and petrol, sending inflation to record levels in previous months.
ECB President Jean-Claude Trichet explained: "Looking ahead we expect a more protracted period of relatively high rates of inflation that we did a few months ago, but the ECB governing council's monetary policy will deliver lower inflation in the medium termâ€
One of the main concerns for businesses is the strength of the euro, which is being underpinned by the interest rate level. The euro has climbed to record levels against the US dollar, and the worry for exporters is that foreign demand will wane as a result. A rate cut, they argue, is needed to weaken the euro and stoke up exports.
The European Trade Union Confederation warned: "The euro's continuing appreciation is becoming alarming, and its growth could exacerbate problems already being caused by wobbles in the world financial markets, slowing global growth and weakening housing markets in a number of key economies.
However, Mr Trichet argued: “The eurozone's underlying growth is fundamentally sound and it is inflation, rather than recession, that poses the greatest threat to stability. Price stability is a prerequisite for sustainable growth and job creation.