ECB Retains Rates; Trichet Says Current Rates Will Control Inflation

Frankfurt, Germany (AHN) - After the central bank in Europe decided to keep the interest rates steady, European Central Bank President Jean-Claude Trichet indicated that the current inflation would remain at the high level for some more period.

"Inflation rates have risen significantly since autumn," Trichet said at a press conference in Athens today after the ECB kept its key rate at 4 percent, according to Bloomberg.

"As we have said, inflation rates are expected to remain high for a rather protracted period of time before gradually declining again."

On Thursday, both the European Central Bank and the Bank of England kept the lending interest rates at 4 percent and 5 percent respectively, amid rising inflation as well as deepening global food crisis and rising crude prices.

The weakening U.S. dollar has affected the region's exports as the euro gained as high as $1.5417 from $1.5313 after Trichet commented on the inflation rate.

The inflation in the 15-nation euro zone has increased as much as 3.6 percent around the start of this year before the rate dropped back to 3.3 percent in April.

"While the U.S. economy has succumbed to stagnation and the U.K. economy is decelerating sharply, the euro zone has so far held up fairly well," Holger Schmieding, Bank of America's chief European economist, told The Associated Press news agency.

"For the time being, that is until the summer break ends in September, the ECB is probably firmly on hold," he said.