ECB's Trichet Says April Interest Rate Hike Possible

An interest rate hike could come as early as next month, but will not be the start of a series of interest rate increases,  European Central Bank President Jean-Claude Trichet said on Thursday.

Inflationary pressures have increased over the last month, risks are to the upside and "strong vigilance" is required, he told a news conference.

Jean-Claude Trichet

"An interest rate increase at the meeting next month is possible," Trichet said. He added: "It is not the start of a series of interest rate increases."

Trichet said the ECB was never "pre-committed" to rate moves and said the decision to keep rates unchanged this month had been unanimous.

The euro surged after Trichet's comments, which were seen as an indication that a rate rise was imminent, while European stocks traded higher.

Oil prices remained lower, with the possibility of peace talks on Libya driving pricing more strongly than Trichet's comments.

"Strong vigilance is warranted with a view to containing upside risks to price stability," Trichet told a news conference after the bank kept interest rates at a record low of 1 percent.

He said inflation pressures had increased since the ECB last met a month ago, largely due to a rise in commodity prices, adding that price risks were on the upside.

The ECB used the phrase "strong vigilance" repeatedly during its 2005-2007 rate hike cycle, typically one month before it raised rates, although there were exceptions to that rule.

It is not clear whether the verbal signal still holds good.

Euro zone inflation accelerated to 2.4 percent last month, moving further above the ECB's target of just below 2 percent.