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ECB’s Mersch Says Price Stability Is Paramount, Tageblatt Says

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Jan. 13 (Bloomberg) -- European Central Bank council member Yves Mersch said the bank can only support economic growth if that doesn’t interfere with its primary aim of containing inflation, Luxembourg’s Tageblatt newspaper reported, citing an interview.

“Our mission is clearly defined,” Mersch, who heads Luxembourg’s central bank, was quoted as saying. “Our mandate is to secure price stability. We can support economic policy, but only if that doesn’t jeopardize our primary goal.”

ECB President Jean-Claude Trichet today signaled the central bank is prepared to raise interest rates from a record low if needed to stem price gains. Inflation accelerated to 2.2 percent last month, breaching the ECB’s 2 percent limit, and Trichet said it may quicken further before moderating toward the end of the year. The ECB’s key rate of 1 percent is still appropriate for now, he said.

Asked if the ECB’s 2011 inflation forecast of 1.8 percent is too low, Mersch said he doesn’t expect a “considerable” increase in the estimate, Tageblatt reported.

“I don’t believe that we will be above the 2 percent mark in the medium term,” Mersch said, according to Tageblatt.

He also said the ECB will stop buying government bonds when markets are functioning again and properly transmitting the central bank’s monetary policy, the newspaper reported.

To contact the reporters on this story: Stephanie Bodoni in Brussels via sbodoni@bloomberg.net

To contact the editor responsible for this story: Anthony Aarons aaarons@bloomberg.net

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