Further growth in eurozone

08:44, February 22, 2011      

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European Central Bank board member Lorenzo Bini Smaghi said yesterday the euro zone is enjoying better-than-expected economic growth, but warned inflation is becoming a concern and higher food and energy prices may be permanent.

"Things are better than expected in terms of growth (and) unemployment," Bini Smaghi told a business lunch in Hong Kong.

In a speech that focused on the financial turmoil in Europe and prospects for the euro currency, he said there were concerns in the financial markets about the eurozone's higher-than-expected inflation and warned that higher energy and food prices may be something economies have to get used to.

"Inflation is higher than expected because of global events. We all have to understand to what extent this higher inflation is due to a -temporary or a longer underlying -phenomenon," he said.

"There is pressure on prices of agricultural products and this may not be a temporary -phenomenon, it may be a permanent one, the same for energy," he said.

On Friday, Bini Smaghi said that the ECB could use its monetary policy in a pre-emptive fashion to head off inflation.

His latest comments helped the euro pare most of its early losses against the dollar in Asian trade yesterday, a situation that keeps alive the prospect that the ECB may raise -interest rates before the United States Federal Reserve.

Source: Shanghai Daily
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