Inflation is still a concern in the euro zone, European Central Bank policymakers said today in comments that backed expectations for another interest rate rise next month.
But officials gave few hints on where rates are headed next year, when tax rises in Germany and an expected slowing in the United States cloud the economic outlook.
ECB Governing Council member Nicholas Garganas said rates remained low, despite the ECB lifting its benchmark rate by 125 basis points since last December to 3.25 per cent currently.
Furthermore, ECB President Jean-Claude Trichet reinforced market expectations for rates to rise to 3.5 per cent in December by repeating the ECB's stance of "strong vigilance" on price risks - wording the central bank has used to signal past rate rises.
Euro zone economic growth eased in the third quarter, and inflation has fallen below the ECB's 2 per cent price ceiling in recent months on the back of lower oil prices.
On Saturday, ECB Governing Council member Axel Weber said inflation risks had lessened in the short term but persisted over a longer horizon. The ECB has said it expects inflation to exceed 2 per cent in 2007 and Mr Garganas said the outlook for 2008 was still unclear, pointing to pressures from faster job creation among other factors.
"There are a number of risks that still worry me: for example labour markets are tightening," he was quoted as saying.
"In many countries, wages have been kept very low. There's this chance that there might be a catching-up process. All in all, there's still a great deal of uncertainty about the development of inflation in 2008."