ECB to keep hiking if growth confirmed

Startbeitrag von swiss2005 am 23.01.2007 10:08

MILAN, Jan 23 (Reuters) - The European Central Bank will need to keep raising interest rates if growth expectations are confirmed to avoid excess liquidity, said ECB board member Lorenzo Bini Smaghi, adding the ECB's rate is "still accommodating."

"Growth will remain robust, also in 2007, the recovery is consolidating," Bini Smaghi told daily La Repubblica in an interview published on Tuesday.

Asked if the ECB would once again raise its interest rate, which is currently 3.5 percent, Bini Smaghi said: "If the growth scenario is confirmed, not to adjust interest rates accordingly would mean feeding excessive liquidity growth."

The fall in world oil prices lowers near-term inflation but raises internal demand and growth potential, Bini Smaghi said.

The central banker said the ECB had been right to begin an interest rate tightening cycle around a year ago, despite criticism at the time, and that its policy had not changed.

"That consists in countering inflationary pressures before they show themselves," Bini Smaghi said.

There's a growing view that the ECB has done a good job and any complaints are mostly linked to the French election campaign, Bini Smaghi said.

((Reporting by Gavin Jones, editing by Neil Fullick; Reuters Messaging: Gavin; +39 02 66129722; fax +39 02 801 149; Keywords: ECB/BINISMAGHI

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