March 26 (Bloomberg) -- European Central Bank President Jean- Claude Trichet said interest rates at a six-year high will help curb inflation in the 15 nations sharing the euro, suggesting he sees no immediate need to cut borrowing costs.

``The current monetary-policy stance will contribute to achieving our price-stability objective,'' Trichet told European lawmakers in Brussels today. ``In the Governing Council's view, the risks to the medium-term outlook for inflation are on the upside.''

The ECB has resisted pressure to follow its counterparts in the U.S. and U.K. and cut rates in response to a global surge in credit costs and slowing growth. Trichet noted that German business confidence unexpectedly rose in March and said inflation, which is running at the fastest pace in 14 years, will stay above the ECB's 2 percent limit for most of this year.

``Inflation developments support Trichet's assessments,'' said Holger Bahr, an economist at Dekabank in the Frankfurt. ``There are no reasons for the ECB to deviate from its path.''

The euro, which jumped more than a cent after today's German business confidence report, extended its gains as Trichet spoke and traded at $1.5735 at 12:55 p.m. in Frankfurt.

Investors reduced bets that the ECB will cut rates this year. The yield on the Euribor interest-rate futures contract maturing in December rose 4 basis points to 4.08 percent, up from 3.31 percent on Feb. 11.

`Sound' Economy

Trichet said the euro area's economic fundamentals ``are sound,'' even as the euro's 18 percent appreciation against the dollar over the past year makes European exports less competitive. The single currency touched a record $1.5903 on March 17.

``We're concerned about excessive exchange-rate moves,'' Trichet said. ``We have noted with great attention that U.S. authorities have reaffirmed that a strong dollar was in the interest of the U.S. economy.''

The euro has appreciated partly as the gap between benchmark rates in the U.S. and the euro region widened.

While the ECB has left its main rate unchanged at 4 percent since credit markets seized up in August, the Fed has cut its benchmark six times, taking it to 2.25 percent this month.

If the ECB had lowered interest rates at a time when inflation was accelerating, ``citizens would have suffered higher inflation'' and ``we would have been asking our fellow citizens to bail out the banks,'' Trichet said.

Worse to Come?

The world's largest banks and securities firms have posted writedowns and credit losses of more than $195 billion since the beginning of 2007 amid the collapse of the U.S. subprime mortgage market.

Trichet said financial-market turmoil is ``an ongoing process'' and ``I won't say that the worst is behind us.''

``In the period ahead, large euro area banks are likely to face pressure on their revenues on account of lower activity levels in the structured credit markets as well as from a general retrenchment from risk-taking across many business lines,'' he said.

Deutsche Bank AG, Germany's biggest bank, said today the subprime collapse and slowing economic growth will ``adversely affect our ability to achieve our pretax profitably objective.''

While Trichet conceded that ``uncertainty about the prospects for economic growth remains unusually high,'' he stressed the ECB remains ``inflexibly attached'' to its price-stability mandate.

To contact the reporters on this story: Gabi Thesing in Frankfurt gthesing@bloomberg.net.

Last Updated: March 26, 2008 08:06 EDT