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Weber concerned about Euro zone inflation – paper

Analysis

ECB Governing Council Member Axel Weber is concerned by the Euro zone’s high inflation rate and said the European Central Bank may need to act against it, Germany’s tabloid Bild Zeitung reported on Wednesday.

“The current high inflation worries me indeed. A rate of price increases that is above 2% is unacceptable in the long term. We have to observe this very carefully and if needed we as the central bank have to act against it, so that higher price increases won’t intensify,” Weber told Bild Zeitung in an interview.

Last week, European Central Bank officials said that Euro zone price pressures were “alarmingly high” and that Q1 growth could exceed expectations, signaling that early interest rate cuts were not on the agenda. Weber said last week that euro zone interest rates at 4.0% would help anchor inflation expectations at a low level in a hint no quick rate cut was likely. Euro zone inflation hit 3.5% in March, its highest level since the single currency’s launch.

Speaking to Bild Zeitung, Weber said the crisis on global financial markets was not over yet. “It’s too early to give the all clear. The confidence crisis is not over yet. Further turbulences should be expected as long as price declines in the US real estate market continue,” the paper quoted him as saying. Weber called upon international banks to restore confidence in the market and said the most effective ways were transparent financial markets and the disclosure of risks, the paper said. He also cautioned on the intervention of the state and told the paper: “In general, the state is only required to fend off a crisis of the overall system. But our German financial system is robust at its core.” (Reuters)

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