Biz people: Trichet issues inflation warning

European Central Bank President Jean-Claude Trichet (below) has warned of the risk of an inflationary spiral resulting from higher energy prices.

"We have a risk of second-round effects with the increases in oil (prices) that we have seen, pump prices," he told French television.

"There is a risk of starting an inflationary spiral. There are non-negligible risks of seeing past increases come in progressively. They have not all come out of the pipeline," he said.

Trichet said there were other inflationary risks in Europe, citing rises in "administered prices."

"In Germany, for example, we have a significant increase and we might have others," he said.

"Given all the risks, we must be credible, when we say: You can trust us in five or 10 years on our definition of less than 2 percent, close to 2 percent," he said, referring to the ECB's inflation target.

(China Daily 01/30/2007 page16)