Luxembourg's central bank chief Monday warned of heightened risks to inflation in the euro-zone owing largely to rising global commodities prices, and said the European Central Bank stands ready to act should rising inflationary pressures threaten medium-term price stability.
"The board of governors remains ready to react in a resolute manner and at the opportune time to avoid heightened risks materializing and weighing on the stability of medium-term prices," ECB governor Yves Mersch said in the Luxembourg central bank's monthly report published Monday.
Mr. Mersch, who is also a member of the ECB's governing board, added it is essential to make sure the recent acceleration in inflation doesn't lead to generalized inflationary pressures in the medium term. Economic analysis shows inflationary risks have heightened, although underlying monetary-expansion remains moderate, he said.
Surging oil and commodity prices have put upward pressure on general prices, as energy markets have worried that unrest in the Middle East and North Africa would reduce production.
Mr. Mersch said the euro-zone's economic trend continues to be positive despite the rising commodity prices and considerable uncertainty in the global economy.
"The current orientation toward very accommodative monetary policy is giving considerable support to economic activity," he said.
