NEW YORK - The European Central Bank signaled Thursday that it may raise interest rates next month in response to intensifying inflationary pressures. Such a move would be likely to lead soon to higher borrowing costs for homeowners and businesses.
An interest rate increase would be the first by a major central bank to prevent the recent effects of higher oil and food prices from spreading into the broader economy. But it could add to the troubles of countries like Ireland, Greece and Portugal and, if continued, would probably further weaken Europe's economic growth prospects this year.
"An increase of interest rates in the next meeting is possible," Jean-Claude Trichet, president of the central bank, said Thursday in Frankfurt, Germany. The next policy meeting on setting rates is scheduled for April 7.
If interest rates rise, private banks are likely to respond by pushing up their own mortgage and deposit account rates, crimping the spending power of many consumers while benefiting savers.
Trichet emphasized, however, that such an increase is "not certain" and that his comments should not be interpreted as "the start of a series of interest rate increases."
The comments surprised most analysts, who had not expected the bank to raise rates until later in the year.
"This is about as clear a signal of a rate hike that you are going to see from a central banker," said Nick Kounis, head of economics at ABN Amro in Amsterdam. "The ECB is once again living up to its reputation as a single-minded inflation fighter."
The euro climbed after Trichet's comments, rising to $1.3959 in New York, from $1.3860 late Wednesday.
