ECB inflation view under study: Trichet

BRUSSELS: The European Central Bank is reviewing the risks to price stability, ECB President Jean-Claude Trichet said on Monday, suggesting the bank could tone down its view on inflation pressures.

While Trichet said the ECB expected inflation to remain above 2 percent in the months ahead, he avoided saying there were "upside risks to price stability" language he used after the bank's last monetary policy meeting on Aug. 4.

"Risks to the medium-term outlook for price developments are under study in the context of the ECB staff projections that will be released early September," Trichet said in a statement to European parliamentarians in Brussels.

A downward revision in the ECB's view of the threat posed by inflation would relieve any pressure for it to follow up the two interest rate rises it has made this year with another hike.

Annual inflation Europe's powerhouse economy Germany eased to 2.3 percent in August, data showed on Monday, giving the ECB one more reason not to hike borrowing costs any time soon.

In its last staff projections, released in June, the ECB forecast euro zone inflation in a range of 2.5-2.7 percent this year and 1.1-2.3 percent in 2012.

Euribor futures show markets have priced out further interest rate hikes for the next couple of years and also see around a 30 percent chance that the bank may be forced to cut rates early next year.

Uncertainty remained particularly high in the context of the euro zone's debt crisis and weakened economic prospects in the United States, Trichet said.

Copyright Reuters, 2011