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ECB economist sees risks in oil prices, weak euro

PRAGUE: A top European Central Bank economist said on Tuesday that higher oil prices, a weak euro and stronger growth raised inflation risks in the euro zone, but the ECB has moved to combat this.

"Obviously at the current juncture the combination of euro depreciation and a sharp increase of oil prices in the context of a clear cyclical (growth) upswing is a source of concern in the euro area," ECB Director-general for Economics Gerd-Jan Hogeweg told a banking conference in Prague.

"But of course, the ECB policy council has recently taken steps to cut those risks."

The ECB raised its key refinancing rate by a quarter point to 3.50 percent on March 16, its third hike in five months.

A Reuters poll of 55 euro-zone economists on Tuesday showed a unanimous forecast for the ECB to keep rates steady this week, while 51 of 55 said the next move would come in the second quarter, with most forecasting another quarter-point hike.

Hogeweg said that the weakness of the euro against the dollar was due mainly to the robust performance of the U.S. economy, but the euro zone was still making progress. "Positive news from the U.S. is sometimes overshadowing progress made in the euro area," Hogeweg said.

"It is very important to emphasise the exchange rate itself is not the policy objective of the euro system," he added, stressing that price stability was the main aim.-Reuters