BERLIN, Dec 29 - The European Central Bank is becoming increasingly uneasy about the euro's rise, fearing it could move substantially higher and undermine the euro zone recovery, a newspaper quoted a senior ECB policymaker as saying on Monday. "The rapid rise of the euro brings an element of uncertainty into our forecasts," the Financial Times quoted a senior official as saying. "We must examine the whole picture." The official added that the ECB needed time to analyse the magnitude and persistence of the euro's rise -- it has gained some 13 percent against the dollar since September -- and said its performance over the next "four to eight weeks" could influence the outlook on interest rates.
"We have warned for some time about the risks to growth posed by economic imbalances in other regions (the U.S.'s budget and current account deficits). Those risks are now materialising," the official said. The ECB is due to hold its next rate-setting meeting on January 8 when it is widely expected to keep rates at 2.00 percent to nurture recovery with inflation under control. However, the strengthening euro is adding doubt to the outlook. The Financial Times quoted the ECB policymaker as saying: "We are clearly not surprised by what is happening...but the decline of the dollar has been relatively sharp." While the euro was an important factor in the equation, he stressed that it was not the only one shaping the outlook for prices and growth.//