19 May 2006, 15:22  Liebscher: ECB worried about risks to inflation outlook

Austrian National Bank governor Klaus Liebscher said the European Central Bank is worried about risks to the euro zone's inflation outlook. "So far, no serious second-round effects of past oil price increases have materialised, thanks to moderate wage increases," said Liebscher, who is a member of the European Central Bank governing council. "Still, we are concerned about the significant upside risks to the inflation outlook," he said. "The past adjustments of the monetary policy stance were therefore warranted to ensure that risks to price stability over the medium term do not materialise," he said. With expectations of an ECB rate hike next month firming, Liebscher added that "vigilant monetary policy is a necessary precondition for dynamic growth and employment". He pointed to "signs for strengthening and broadening" growth in the euro zone. "At the same time, the still historically low interest rates and strong corporate profits provide for a favourable investment climate, as confirmed by several leading indicators such as the Belgian business survey indicator," he said. "But there are now also increasing signs ... that we may gradually reach potential growth," he said.

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