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The Federal Reserve and the European Central Bank painted contrasting pictures of the US and European economies on Thursday, with Ben Bernanke, Fed chairman, depicting a US economy that could continue to grow rapidly without generating inflation, while the ECB hinted that further interest rate rises were needed to stem inflationary pressure in the eurozone. Together, the statement by Jean-Claude Trichet, ECB president, and the speech by Mr Bernanke indicated that European interest rates were likely to rise while there was no urgency for further US rate rises.Mr Bernanke gave an optimistic assessment of the US economy's ability to continue rapid economic growth without triggering further inflationary pressures.
Across the Atlantic, Mr Trichet announced big upward revisions to the ECB's inflation forecasts for this year and next and called for "strong vigilance" to defend price stability – code words used to signal an interest rate increase in early October. He added that he expected "a progressive withdrawal of monetary accommodation", implying more than one rise in borrowing costs was likely.Eurozone consumers' fears about inflation increased in August to the highest level since the introduction of euro notes and coins in 2002, according to a European Commission survey on Thursday. The ECB left its main interest rate unchanged at 3 per cent. But a quarter percentage point rise is now expected at the bank's meeting in Paris on October 5.
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