Financial market turbulence should have only a limited impact on euro-zone growth, European Central Bank policymakers said at weekend meetings of global financial officials in Washington.
But they gave conflicting assessments of the inflation outlook, suggesting there is no consensus for any quick move to raise interest rates past their current 4 percent level.
ECB Executive Board member Juergen Stark said inflation risks had increased, echoing comments by Germany's Axel Weber. But Belgium's Guy Quaden said slower growth could have a downside impact on inflation, which has edged above the ECB's 2 percent ceiling and is expected to stay there in coming months.
In an interview with Germany's Frankfurter Allgemeine Zeitung, Stark said the fundamentals of the European economy were strong and it should withstand the market upheavals.
"So far there are many signs that the tensions on financial markets will have only a very limited negative impact on growth in the euro zone," he was quoted as saying.
Quaden agreed, telling news agency Market News International on the fringes of International Monetary Fund meetings that "financial turbulences will have probably a negative impact, but also a limited one."
However, he noted the downside risks to growth in the 13-nation region and said this could have an impact on prices.
"It cannot be excluded that some other elements -- in particular a moderate slowdown of the economy -- can exert a downside influence on inflation," Quaden said.
This view contrasts with that of Stark, who said high energy and food prices and the tightening labor market all put pressure on inflation.
"The inflation danger has increased," Stark said, in comments similar to those by Weber and Greece's Nicholas Garganas.
Weber told Reuters in a Friday interview that the ECB would not sit on its hands while the inflation outlook worsened.
"We have to credibly communicate that we will not tolerate a long-term increase in inflation rates and that we are ready, if necessary, to counter such an increase with our monetary policy," he said on the fringes of Group of Seven meetings.
NO AGREEMENT YET
But other policymakers have avoided drawing conclusions about the current situation, pointing to increased uncertainty and a need for more information.
The ECB has kept interest rates on hold at 4 percent since June, after a squeeze on global credit markets in mid-August scotched a rate rise almost all analysts had expected for September. Now most economists expect the ECB to keep rates on hold through 2008
In an interview with Italy's Il Messaggero, Lorenzo Bini Smaghi offered no clear indication in what direction interest rates should move in the current situation.
"In this phase, monetary policy must create certainty and continue to be focused on the medium-term to guarantee price stability, as the ECB mandate says," he said.
Stark was quoted as saying that more information was needed to build a clearer picture of the inflation outlook before any possible further increase in rates.
ECB President Jean-Claude Trichet told a news briefing after the G7 meeting that the ECB had to remain "vigilant" in maintaining price stability.
"Any further increases of oil and commodities, oil and gas, are very much at the heart of your question -- and are triggering an inflationary impact and a depressive impact on the economy," he said in response to a question.
Portugal's Vitor Constancio told daily Jornal de Negocios that economic indicators in recent days have not given a positive reading of the world economy but it was too early to draw conclusions.
Constancio said the recent rise in the price of oil, a decline in the U.S dollar and some negative days in the stock market were troubling.
"These are not good indicators but we are only talking about days and it is therefore still not possible to draw big conclusions," he said.
(Additional reporting by Henrique Almeida in Lisbon and Lisa Jucca in Milan)