The head of the European Central Bank has suggested that rising energy prices could contribute to growing inflation levels across the eurozone, while calling on European government’s with large deficits to engage in spending cuts to help curb inflation and strengthen the regional economic recovery.

The president of the European Central Bank has today warned Europe of the threat of rising regional inflation over the coming months, as a side-effect of spiraling energy and commodity prices.

President Jean-Claude Trichet said that the rising cost of energy would have a knock-on effect throughout the eurozone, and may lead to inflation rising above manageable levels over the next few months, in spite of recent rigid monetary policy decisions from the ECB.

The news comes after the ECB voted to hold its interest rates at 1%, broadly in line with their counterparts at the Bank of England who also maintained rates at the same level of 0.5% for yet another month.

In warning against the risks of ongoing inflation, President Trichet also warned European economies with significant debt books to slash public spending, in an attempt to strengthen their individual and collective recovery whilst also helping to tame the effects of rising price inflation.

Last Updated: January 18th, 2011