The European Central Bank's interest rates are very low and a scaling down of its support measures is warranted, a senior ECB policymaker said on Tuesday but another played down the risk from inflation.
The ECB raised interest rates to 1.25 percent last week, bringing to an end almost two years of record low rates, and signaled it was ready to tighten policy further if needed to check rising prices.
ECB Executive Board member Juergen Stark said the Frankfurt-based central bank's monetary policy stance had become more accommodative than at the peak of the financial crisis.
But his fellow policymaker, Malta central bank chief Michael Bonello, said inflation is likely to moderate and that there is a chance it could be even lower than forecast.
There has been little in policymakers' comments since Thursday's decision to pin down more precisely when the bank may raise interest rates again. Financial markets are backing June or July.
Another issue in the meantime is whether or how fast the bank plans to continue with the withdrawal of the emergency funding put in place for banks at the height of 2008's financial crisis. Stark said such non-standard policy measures should be withdrawn.
Looking ahead, a return to a more normal liquidity management and to a more moderate scale of central bank intermediation is warranted, he said.
As with the phasing-in of non-standard measures, there are no pre-defined steps between phasing them out and exiting from very low policy interest rates, Stark added. Non-standard measures can in fact co-exist with any interest rate level.
The ECB said in March it would carry on providing unlimited funding for banks at its three-month operations through to the end of June and would keep full allotment at its weekly and one-month operations, until at least July 12.
Euro zone inflation rose to 2.6 percent last month, above the ECB's long-term target of just below 2.0 percent.
Sky-high oil prices are beginning to dent oil demand growth, the International Energy Agency said on Tuesday, but added prices could ultimately moderate through a global economic slowdown.
There is a lot of uncertainty with regards to inflation at this point but risks could be on the downside and it would be presumptuous to say what course of action will be taken, Bonello told a news conference in Valletta.
We must not jump to conclusions on the future course of monetary policy, he added.
Stark, a member of the ECB's six-member Executive Board that runs the bank's day-to-day business, suggested rates could rise further before the ECB phases out the crisis measures it instituted to help banks.
The ECB will adjust its policy interest rates and its provision of liquidity at a pace and to a degree commensurate with the evolution of risks to price stability and as appropriate to maintain an orderly and functional monetary policy transmission, Stark said in Hong Kong.
Financial markets see the ECB raising interest rates twice more this year to 1.75 percent and two-thirds of economists polled by Reuters after last week's rate hike see the next rise coming by July at the latest.
Policymakers have given few clues about their next move though they have left the door to further increases open.
One factor which might ease inflation pressures in the euro zone is the stronger currency. The euro climbed above $1.45 on Tuesday for the first time since January 2010.
While Stark and Bonello struck a different tone on interest rates, Bonello's comments on liquidity measures echoed Stark's.
The generous availability of euro system liquidity may reduce counterparties incentives to correct their balance sheets, Bonello said. It also entails risk for the euro system even though the collateral policy has been revised.
Turning to the ECB's operational framework, Stark said the central bank would stick to its principle of equal treatment of counterparties after the financial crisis. This framework also needed to be designed to contribute to a healthy banking sector.
The issue of how to tackle the problem of zombie banks that are cut out of inter-bank lending and have become dependent on ECB funds is being increasingly debated by policymakers.
(Writing by Sakari Suoninen; editing by Patrick Graham)