Agence France-Presse . Frankfurt

The European Central Bank hammered home Thursday its concern that inflation could become entrenched in the 15-nation eurozone, stressing once again that fighting rises in consumer price was its primary goal.

The ECB ‘confirmed the existence of strong short-term upward pressure on inflation’ in its monthly bulletin, which reiterated comments by bank president Jean-Claude Trichet a week earlier when the bank left its main interest rate unchanged at 4.0 per cent.

He had said that keeping price rises under control was the ‘primary objective’ of the ECB governing council and that its ‘highest priority’ was to keep expectations regarding future inflation firmly in check. The council ‘believes that the current monetary policy stance will contribute to achieving this objective,’ the bulletin said.

While leaving its key lending rate unchanged, the ECB also cut growth forecasts and raised inflation estimates last week by more than economists had expected.

The bank put its midpoint estimate for economic growth this year at 1.7 per cent, down from an earlier estimate of 2.0 per cent. For 2009 the ECB cut its growth prediction to 1.8 per cent from 2.1 per cent. The inflation outlook for 2008 was raised meanwhile to 2.9 from 2.5 per cent, higher than expected, owing to rising commodity and food prices.

ECB directors have come under pressure to lower the bank’s main interest rate in the wake of sharp cuts by the US Federal Reserve, which has slashed its Fed funds rate to 3.0 per cent since September to boost the US economy and appears ready to reduce it again.

That has pushed the dollar lower against the euro, which set a new high of 1.5592 dollars in early European trading on Thursday. The dollar also plunged below the key 100 yen level for the first time in 12 years amid growing concerns about the health of the US economy, dealers in Tokyo said.

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