FRANKFURT (Thomson Financial) - European Central Bank Executive Board member Gertrude Tumpel-Gugerell said the ECB's monetary policy is on the accommodative side and reiterated that the central bank may raise interest rates at its next policy meeting.
Just as in the 1970s, a range of indicators show that monetary policy is 'on the accommodative side' and inflation expectations are trending upwards, she said in a speech.
'Both require us to be cautious today too,' she said.
Tumpel-Gugerell said the ECB is determined to ensure that inflation expectations are anchored at levels in line with its price stability target.
'This is why we have said that, under present conditions, the ECB Governing Council could raise interest rates slightly in the near future,' she said.
Tumpel-Gugerell said there are not yet any signs of broad-based second round inflation effects in the euro zone as a whole, but developments in some countries do give cause for concern.
'Some initial worrying signs of increasing wage pressures in individual countries, particularly in the public sector, cannot be overlooked,' she said.
She noted that the annual rate of increase in negotiated wages accelerated to 2.7 percent in the first quarter from 2.2 percent in 2007.
'In view of high rate of capacity utilisation, continuing tension in labour markets and the danger of second round effects, it cannot be excluded that future wage agreements turn out unexpectedly high,' she said. steve.whitehouse@thomsonreuters.com sw/ra COPYRIGHT Copyright Thomson Financial News Limited 2008. All rights reserved. The copying, republication or redistribution of Thomson Financial News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Financial News.
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