ECB plans to cool inflation through raising interest rates

PanARMENIAN.Net - The European Central Bank (ECB) is expected to raise interest rates later in an attempt to cool inflation.

Despite debt problems facing some smaller eurozone nations, the ECB is worried about overheating in economies such as Germany.

Last month, the ECB said it would keep "strong vigilance" on inflation - seen as a signal that rates will rise to 1.5% from the current level of 1.25%.

Eurozone inflation is 2.7%, above the ECB's target of just below 2%. The ECB's primary role is to keep inflation low by setting interest rates for the 17 countries that use the euro. But any rise would increase borrowing costs, adding to pressure on countries such as Greece and Portugal.

In a press conference following the interest rate announcement ECB president Jean-Claude Trichet is likely to face questions on Europe's debt crisis, BBC reported.

Since the last ECB meeting in June, the eurozone avoided its first debt default since its creation in 1999 after the Greek Parliament approved austerity measures required by international creditors.

The ECB has played a central role in the debt crisis by keeping Greek banks afloat with emergency cash.