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ECB's Papademos-oil prices pressure growth, inflation

Sun May 25, 2008 3:48pm EDT

FRANKFURT, May 25 (Reuters) - Euro-zone inflation pressures have intensified due to rising oil prices, which are also dampening growth, European Central Bank Vice President Lucas Papademos said in a newspaper interview published on Sunday.

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Papademos told Greece's Eleftheros Typos paper that inflation was expected to remain "significantly" above the ECB's 2 percent ceiling in coming months, while the outlook for growth was surrounded by especially high uncertainty.

Although the 15-nation region expanded more than expected in the first quarter, policymakers have warned that the second quarter will be weaker.

"The substantial and continuing increase in the price of oil has contributed to the deceleration in the rate of economic growth in the euro area," Papademos said, according to a transcript of the interview provided by the ECB.

"But, at the same time, it has intensified inflationary pressures."

Inflation was running at 3.3 percent in April, well above the ECB's goal of below but close to 2 percent.

The ECB has kept euro-zone interest rates at 4 percent for the last 11 months and is expected to leave them unchanged in June, although most analysts expect it to follow other major central banks and loosen policy later this year as growth slows. (Reporting by Krista Hughes, editing by Maureen Bavdek)



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