The European Central Bank (ECB) left rates on hold at an historic low of 1 per cent Thursday despite signs of mounting inflationary pressures, DPA reported.
ECB chief Jean-Claude Trichet is expected to raise the bank's inflation forecast when he sets out the bank's new so-called staff projections for consumer prices and economic growth at his regular monthly press conference later Thursday.
This comes after the European Union's statistics office Eurostat released preliminary data on Tuesday showing annual inflation in the 17-member eurozone climbed to a 28-month high of 2.4 per cent last month.
The increase in consumer prices in the currency bloc left inflation uncomfortably above the ECB's target of keeping inflation close to but below 2 per cent. Eurozone inflation stood at 2.3 per cent in January.
Further increasing the pressure on the ECB, data published Wednesday showed industrial producer prices in the eurozone rising by 1.5 per cent month-on-month in January and 6.1 per cent year-on-year.
Still, most analysts believe that with parts of the eurozone battling to clean up their state finances in the wake of the debt crisis that hit the region last year the earliest that the ECB will consider hiking rates is the fourth quarter of this year.
The pickup in eurozone inflation also comes at a time of growing concern among economists that rising oil prices triggered by the unrest sweeping the Middle East could place at risk the global recovery from recession.
The ECB's key refinancing rate has been on hold at 1 per cent since May 2009 as the bank has moved to shore up economic confidence in the currency bloc.
The signs of renewed inflationary pressures are also likely to help strengthen the hand of the more hawkish members of the ECB's 23-head rate-setting council.
This could result in the bank taking further steps to wind back the emergency liquidity measures it launched to help counter the financial crisis which emerged at the end of 2008.
In December, the ECB's staff projections pointed to inflation averaging 1.8 per cent this year before easing up to 1.5 per cent in 2012.
While many analysts believe that Trichet will say Thursday that the ECB now expects inflation to top the bank's 2-per-cent target this year, they expect the staff projections to show inflation falling back below the key 2-per-cent mark in 2012.
Ahead of the ECB's meeting the European Commission raised its 2011 inflation forecast for the eurozone to 2.2 per cent from a previous 1.8 per cent.
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