April 11, 2008	Friday	Rabi-us-Sani 4, 1429

FRANKFURT, April 10: The head of the European Central Bank appealed for price and wage restraint on Thursday, recalling “mass unemployment” after pay hikes years ago and signalling no change in ECB interest rates any time soon.

“There is certainly no room for complacency in this regard,” he warned after forecasting “a rather protracted period of temporarily high annual rates of inflation,” in the 15-nation eurozone.

Trichet spoke after the ECB left its main lending rate at 4 per cent to strike a balance in dealing with strong inflation and slowing growth.

Analysts said his comments suggested that ECB rates would remain on hold for the time being.

Trichet pressed trade unions and businesses to refrain from calling for excessively high wage increases and from raising prices further, moves the bank terms second round effects in contrast to the first round of food and energy price hikes.

“The second round effects that we observed in the first and second oil shocks created mass unemployment in Europe,” Trichet explained in reference to surges in oil prices in the 1970s.

The bank was now “strongly committed to preventing second round effects” and considered the solid grounding of inflation expectations as its highest priority, he added following the governing council’s unanimous decision.

Eurozone inflation hit a 16-year high of 3.5pc in March, and ECB officials have stressed the need to counter expectations that prices would climb still higher.—AFP