FRANKFURT, April 12: The outlook for growth in the 13-country eurozone remains favourable and there are still upside risks to price stability in the single currency area, European Central Bank President Jean-Claude Trichet said on Thursday.

Speaking after the ECB held its key interest rates steady at 3.75 per cent at the bank's regular monthly meeting here, Trichet hinted at further rises in eurozone borrowing costs in the coming months by insisting that “the outlook for price developments remains subject to upside risks.” And the bank, known as the guardian of the euro, would act in a “firm and timely manner” to counter such risks, the Frenchman vowed.

While statistical base effects were likely to lead to a slowdown in area-wide inflation in the short term, the annual rate of inflation in the 13 countries that share the euro would likely “rise again towards the end of the year to hover again at around 2.0 per cent.”

The ECB defines price stability as inflation rates close to but just below 2.0 per cent.

The main factors behind the anticipated pick-up were “the possibility of further oil price rises and additional increases in administered prices and indirect taxes beyond those announced and decided thus far,” Trichet said.

“More fundamentally, stronger than currently expected wage developments could pose significant upward risks to price stability, not least in view of the favourable momentum in labour markets observed over the past few quarters,” he continued.

Liquidity in the eurozone economy was also “ample by all plausible measures” as seen in robust money supply growth, which the ECB sees as a gauge of future inflation.

The eurozone's money supply expanded by 10.0 per cent in February, way above the ECB's reference value of 4.5 per cent.

“Monetary developments therefore continue to require very careful monitoring, particularly against the background of a solid expansion in economic activity,” Trichet said.

“On the basis of the latest data, it appears that robust growth is continuing in the first half of 2007,” he said.

And “looking further ahead, the conditions are in place for the euro area economic to grow solidly,” Trichet added.—AFP