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European Central Bank council members Axel Weber and Juergen Stark signaled they are ready to raise interest rates if needed to contain inflation even as a global credit squeeze threatens the economy.

The ECB “will act'' to contain “alarming'' price pressures if its inflation goal is threatened, Weber said in a speech in Luxembourg today. Stark said in Cape Town he “cannot be sure'' that the ECB's benchmark rate, currently at a six-year high of 4 percent, is high enough to contain inflation.

The euro climbed after their remarks, which contrast with the views of other policy makers such as Portugal's Vitor Constancio and Belgium's Guy Quaden, who say that slowing growth will damp price pressures. Inflation in the euro region accelerated to 3.3 percent in February, the fastest pace in 14 years. The ECB has refrained from following the U.S. Federal Reserve in lowering borrowing costs to bolster economic growth.

The euro, which advanced to a record $1.5903 on March 17, climbed as much as 0.4 percent to $1.5839. The ECB aims to keep inflation just below 2 percent.

Stark, who along with Weber is regarded by economists as one of the ECB's toughest inflation fighters, said today price pressures are a “matter of particular concern'' and “it is very likely that the first quarter is better than expected.''

Housing Recession

A U.S fast payday loans free credit report .com. housing recession has caused a global credit squeeze for the past seven months, clouding the economic outlook globally. The cost of borrowing in euros and pounds for three months today held at the highest levels this year as banks hoard cash before the end of the quarter. Luxembourg's Yves Mersch said today the ECB will do what's needed to ensure “well- functioning'' markets.

European retail sales fell in March and consumer confidence dropped across the region, separate reports showed today.

Some ECB policy makers are expressing greater concern than Weber and Stark about the health of the European economy. Quaden told the Wall Street Journal in an interview published yesterday that slowing economic expansion “should alleviate inflation pressures.''

Constancio said March 14 the euro's 19 percent jump against the dollar in the past year “helps to control inflation.''

Expansion in Germany, Europe's largest economy, will fall short of the Bundesbank's December forecast of 1.6 percent for 2008, Weber said today. citing the euro's appreciation, record oil prices and financial-market turmoil.

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