``Our monetary policy stands ready to counter upside risks to price stability,'' Trichet said at a press conference in Frankfurt today after leaving the ECB's benchmark refinancing rate at 4 percent. Still, ``in view of the potential impact of prolonged financial-market volatility and the re-pricing of risks,'' uncertainty surrounding the economic growth outlook ``remains high.''
Signs of discord have grown among the ECB's 19 Governing Council members. With oil prices near $100 a barrel stoking the fastest inflation in two years, some have signaled they want to raise interest rates further. Other policy makers argue the euro's appreciation and the U.S. housing slump will curb Europe's economic expansion and damp price pressures.
The Bank of England today kept its benchmark interest rate at 5.75 percent, a six-year high, with policy makers resisting calls for a cut on concern that rising oil and food prices will fan inflation. The U.S. Federal Reserve on Oct. 31 pared its key rate by a quarter-point to 4.5 percent, the second cut in as many months, to shore up growth in the world's largest economy.
The euro remained close to a record high after the decision, trading at $1.4660. It has gained 15 percent versus the dollar in the past year and reached a record $1.4731 yesterday.
`Monitor Very Closely'
``In the recent period I have observed moves that were undoubtedly sharp and abrupt,'' Trichet said. ``Brutal moves were never welcome.''
The ECB shelved a planned rate increase in September after defaults on U.S. mortgages aimed at people with a poor credit history hurt some of Europe's largest banks, pushing overnight lending rates to a six-year high.
On the increase in credit costs since early August, Trichet said ``we will continue to observe and monitor this process very carefully.'' While risks to economic growth continue to lie ``on the downside,'' the ECB did not change its baseline scenario, he said.
The ECB in September forecast euro-region economic growth will slow to about 2.3 percent in 2008 from 2.5 percent this year. Last year, the region's economy expanded 2.8 percent, the fastest since the start of the decade.