European Central Bank president Jean-Claude Trichet has hinted interest rates may rise next month to fend off inflation pressures.
The ECB yesterday left interest rates at their record low of 1%, despite inflation being above the group's 2% imposed target, but there were hints a rise is likely soon.
Trichet says: "An increase of interest rates in the next meeting is possible. The ECB is prepared to act in a firm and timely manner."
On the back of Trichet's remarks the euro reached highs of 0.9% against the dollar, the highest rise since last November.
Trichet also has the backing of board member Juergen Stark who last week said the ECB will act if needed to prevent soaring commodity prices driving up price expectations.
However, other board members are wary of upping interest rates as this could potentially aggravate the eurozone's sovereign debt crisis if the policy is tightened too quickly.
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