MILAN: A European Central Bank board member said in an interview published on Tuesday that eurozone interest rates should be raised to ensure price stability and avoid "a destablisation of the markets."
"The longer we wait to adapt interest rates to the new conditions of the European economy, the bigger the readjustment will be," Lorenzo Bini Smaghi said in an interview with the Corriere della Sera daily.
"Leaving interest rates unchanged at the level of the past two years would only increase monetary expansion further," Bini Smaghi said, adding that there was "a major risk of a destabilisation of the markets."
"An overly expansive monetary policy creates excess liquidity," he said. The ECB, the central bank for the 16-nation eurozone, shocked financial markets last week by signalling an interest rate hike could come as soon as next month to keep inflation from spiralling out of control.
"An interest rate increase in the next meeting is possible, it is not certain," ECB president Jean-Claude Trichet said after the bank's governing council left the rate at a record low of 1.0 percent.
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