Trichet says some further ECB tightening warranted if recovery continues

European Central Bank president Jean-Claude Trichet said the ECB will need to raise interest rates further if the euro zone economy continues to recover in line with its expectations. The ECB governing council raised its key interest rate to 3.25 pct from 3.00 pct at its meeting in Paris today, a move that was fully expected by financial markets. "If our assumptions and baseline scenario are confirmed, it will remain warranted to further withdraw monetary accommodation," Trichet said in his introductory statement to a news conference following the rate hike announcement. The ECB's staff forecasts, published on Aug 31, point to euro zone growth of 2.5 pct this year and 2.1 pct next year. However, Trichet dropped the word "progressive" from his comments about a further withdrawal of monetary accommodation, which could be interpreted as a signal the ECB is planning to raise rates only once more. Trichet said today's rate hike is intended to counter continuing inflation risks in the euro zone. He said the decision "reflects the upside risks to price stability over the medium term that we have identified through both our economic and monetary analyses". Trichet said that even after today's rate hike, euro zone interest rates are still low and the central bank's monetary policy remains accommodative, meaning that it continues to stimulate economic growth. "... The key ECB interest rates remain at low levels, money and credit growth are strong, and liquidity in the euro area is ample by all plausible measures. "Our monetary policy therefore continues to be accommodative," he said. Trichet said the central bank will continue to "monitor very closely all developments so as to ensure price stability over the medium and longer term".