ECB’s Trichet: Advanced Economies’ Crisis a ‘Formidable Challenge

By Luca Di Leo

The U.S., Europe and other advanced economies face new formidable challenges in dealing with high debt and low growth, European Central Bank President Jean-Claude Trichet said Saturday.

Speaking at the end of a two-day meeting of top central bankers, Mr. Trichet said Europe was particularly challenged by its governance problems. Responding to questions by policy makers such as World Bank President Robert Zoellick worried by Europe’s ongoing debt crisis, he cautioned that overhauling the continent’s institutions is a “complex process… we’re observing history in the making.”

ECB raises eurozone interest rates to 1.5%

The European Central Bank (ECB) has raised interest rates to 1.5% from 1.25% in an attempt to cool inflation in the 17-nation eurozone.

ECB president Jean-Claude Trichet said that inflation, now 2.7%, was likely to remain "clearly" above the ECB's 2% target over the coming months.

ECB signals eurozone interest rates are set to rise

Earlier on Thursday, the ECB kept rates unchanged for the second month in a row, after increasing them in April for the first time in almost two years.

The central bank wants to raise rates again in July to curb inflation in some of the eurozone's 17 member states.

But it has to balance that against the need to leave rates low to boost growth in nations such as Greece and Portugal.