April 28 (Bloomberg) -- European Central Bank President Jean- Claude Trichet said the bank must set interest rates with the sole goal of maintaining price stability, rebuffing calls from the French and Italian governments for it to take growth into account.

``It's crucial that the Governing Council sets the appropriate monetary policy stance on the basis of no other considerations than the delivery of price stability in the medium term,'' Trichet said at a conference in Vienna today. The bank's current policy stance ``will contribute to achieving our objective,'' he said.

The ECB has held its key rate at a six-year high of 4 percent to contain inflation, which accelerated to 3.6 percent last month, the fastest pace in 16 years. That's helped drive the euro to a record against the dollar, threatening to deepen Europe's economic slowdown and leading to calls from some governments for the ECB to take more account of growth.

French Finance Minister Christine Lagarde said today the stronger euro is a ``handicap'' for French companies. Yesterday she said the gap between the ECB's benchmark rate and that of the U.S. Federal Reserve is a ``bit too big'' and that a ``more flexible'' ECB could help narrow it. The Fed's main rate is now at 2.25 percent.

Berlusconi Wades In

Italian Prime Minister-elect Silvio Berlusconi said April 16 that the ECB should do more than just target low inflation when setting monetary policy. ``The ECB must have broader functions, with a majority deciding, to go beyond controlling inflation,'' he said.

Trichet repeated that he's concerned about the euro's gains, which are undermining the outlook for European exports. ``There have been at times sharp fluctuations between major floating currencies and we're concerned about their possible implications for economic and financial stability,'' he said.

Economic growth in the euro region will slow to 1.5 percent in 2009, the European Commission said today in its spring economic forecast. That's 0.6 percentage point less than it projected in November and below the 1.7 percent predicted for 2008. Inflation will jump to 3.2 percent this year before easing to 2.2 percent in 2009, the commission said.

Speaking at the same conference as Trichet, ECB council member Klaus Liebscher said the bank has to ``closely monitor'' all developments and act preemptively if necessary to prevent surging oil and food prices from feeding into wages.

`Very, Very Concerned'

``One has to be very, very concerned about the general development and the general outlook'' for prices, Liebscher told reporters afterwards. ``There's no reason for any kind of complacency.''

Luxembourg Finance Minister Jean-Claude Juncker, who chairs a group of counterparts from the 15-nation euro area, told the conference that the stronger euro has ``advantages'' in that it damps imported inflation.

``Fuel would be significantly more expensive'' if the euro hadn't risen so much against the dollar, Juncker said, adding: ``The ECB has become the anti-inflation machine we wanted.''

Economists at Deutsche Bank AG, HSBC Securities and JPMorgan Chase & Co. last week bet accelerating inflation will force the ECB to keep interest rates at 4 percent for longer than previously anticipated. The economists said the bank will start cutting interest rates in the final quarter of this year, having previously anticipated a reduction by the end of the third quarter.

To contact the reporters on this story: Simone Meier in Vienna at smeier@bloomberg.net; Simon Kennedy in Paris at skennedy4@bloomberg.net

Last Updated: April 28, 2008 10:42 EDT