Trichet said the European Central Bank remains ready to take pre-emptive action to counter mounting euro zone inflation risks if necessary, adding recent data fully confirmed upside risks to the inflation outlook. Inflation will remain "significantly" above 2.0 pct in the coming months in the region and will only moderate gradually during this year, he said. "Hence the period of temporarily high rates of inflation would be somewhat more protracted than previously expected," he said. Trichet said the expected moderation in the inflation rate assumes "some reversal of the recent rise in commodity prices", as well as that recent oil and food price increases and their impact on inflation "do not have broadly-based second-round effects on wage and price-setting behaviour." Risks to the medium-term outlook for inflation are "fully confirmed to lie on the upside," including stronger-then-expected wage growth and pricing power of firms. "It is imperative that all parties concerned meet their responsibilities and that second-round effects on wage and price-setting stemming from current inflation rates be avoided," Trichet said. He emphasised that the ECB is monitoring wage negotiations in the euro zone "with particular attention." Turning to economic growth, he said that while euro zone growth moderated in the fourth quarter, the ECB still expects the euro zone's GDP growth rate to be around its potential rate. The euro zone's economic fundamentals are sound, he said, but cautioned that uncertainty about growth prospects remains high. Risks to the growth outlook are still tilted to the downside, he added. These risks include a "potentially broader than currently expected" impact of recent financial market turbulence on financing conditions and economic sentiment, Trichet said. Other risks stem from possible further oil and commodity price increases, concerns about protectionist pressures and the possibility of "disorderly developments" due to global imbalances. Commenting on recent turbulence on financial markets, Trichet said there is "little evidence" that money and credit growth have been affected.