'The Monetary Policy Committee (MPC) cannot ignore the fact that recession threats have worsened. While the near-term rise in inflation is unavoidable, it is also temporary as weaker growth would clearly push down inflation sharply next year. Limiting the threat of a major recession must be the priority,' said David Kern, economic adviser to the British Chambers of Commerce.
'As soon as inflation peaks later in the year, the MPC should start cutting interest rates without delay,' he added.
European Central Bank President Jean Claude Trichetsaid economic growth will be ``particularly weak'' through the third quarter, suggesting policy makers are wary of raising interest rates again to curb inflation.
While the ECB's decision to raise borrowing costs last month was justified by the inflation threat, risks to growth ``are materializing,'' Trichet told reporters in Frankfurt today after keeping the benchmark rate at 4.25 percent. ``Overall, downside risks prevail.''
Inflation risks ``remain clearly on the upside and have increased over the past few months,'' Trichet said. ``There is very strong concern that price and wage-setting behavior could add to inflationary pressure.''
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