European Central Bank (ECB) president Jean-Claude Trichet has refused to rule out raising interest rates again after July as a means of containing inflation.

Speaking to the European Parliament in Brussels, he said the ECB may yet raise its benchmark lending rate to 4.25 per cent in July in an effort to counteract price increases.

He said: “I said we could decide to move our rates by a small amount in our next meeting in order to secure this solid anchoring of inflation expectations. I said it's possible. And of course it was noted by all observers as something that was important.”

He added: “I didn't say that we could envisage a series of increases. That being said, of course we never pre-commit.''

Record oil and food costs pushed inflation to 3.7 per cent in the eurozone last month, well above the ECB's 2 per cent limit. The price of oil has doubled over the past year to $134.38 a barrel today, boosting companies' costs and squeezing household incomes.

Mr Trichet said the ECB was in a state of heightened alertness about inflation and saw an “acute” risk of a wage-price spiral.

Economists suggested there could be as many as two rate hikes in the coming months. They pointed to the last time the bank started tightening policy - at the time Mr Trichet also said the ECB wasn't embarking on a series of increases. It raised rates eight times between December 2005 and June 2007, doubling the benchmark to 4 per cent

Meanwhile, the US Federal Reserve, which has been meeting in the past two days on interest rates, is widely expected to hold its base lending rate at 2 per cent after a series of aggressive cuts since last September. Fed chair Ben Bernanke will be issuing a statement later today.

The Fed’s rate had been at 5.25 per cent before the central bank began cutting rates on September 18. American analysts say the US economy is still too fragile to be able to absorb higher interest rates amid a horrific housing slump, high oil prices and tight credit conditions, but that the Fed may look towards higher rates in August or September because of the growing inflationary concerns.

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