FRANKFURT, July 5 (Reuters): The European Central Bank's interest rate rise sends a signal that it is serious about combating inflation, policymakers said as they staged a public relations offensive to justify Thursday's increase.
In interviews with media across the Eurozone, policymakers denied the rise to a near seven-year high of 4.25 per cent would choke economic growth and said soaring inflation was a bigger danger to the 15-nation region.
Luxembourg's Yves Mersch said the ECB could do little to influence soaring international commodity prices but it could take steps to head off Eurozone wage pressures.
"We are sending a signal today which shows that we are determined to act against home-made inflation," he told the Luxemburger Wort newspaper.
The ECB raised rates by 25 basis points but President Jean-Claude Trichet said the governing council had no bias in favor of further rate moves, damping market expectations of another increase soon.
German Bundesbank President Axel Weber said central bankers could not stand idly by while inflation rose to more than double the definition of price stability, potentially driving up inflation expectations and hurting confidence in the ECB.
Some risks to inflation had already materialised, making action imperative, Weber said in an interview with the Suedkurier newspaper. Eurozone inflation hit a record 4.0 per cent in June, compared with the ECB's 2 per cent ceiling.
"Given the increases in inflation expectations in the last months I would not speak of a prophylaxis," Weber was quoted as saying. "Some risks to price stability in the medium term have already materialised. A stability-oriented monetary policy must react to such developments, and that is what we have done."
Mersch and Weber gave little away on future monetary policy, repeating Trichet's assessment Thursday.
Economists viewed the rate rise as a warning by the ECB that it was serious about tackling inflation which was unlikely to have a serious negative impact on growth, despite protests from European trade unions.
"This was a warning shot fired in the air. The next one would be aimed at the legs of the Eurozone's economy, should it prove necessary," said UniCredit's chief economist Marco Annunziata.
