Global inflation alarm bells ringing for ECB's Hurley

DUBLIN (Reuters) - Irish central bank chief and European Central Bank policymaker John Hurley said on Tuesday that the world's central banks were deeply concerned about oil and commodity price-driven global inflation.

In a speech to an Irish parliamentary committee, Hurley said the ECB had raised euro zone interest rates earlier in the month specifically to combat inflation, warning that it had the potential to sap Europe's prosperity.

"Central banks are very focussed on this issue and are particularly concerned that the rise in commodity prices does not spread out into higher inflation generally," he said.

"Inflation... creates uncertainty for savers and investors and undermines confidence in an economy in a way that ultimately damages the welfare of its citizens."

He added that central banks had to be seen as serious about fighting inflation for their actions to have an effect. However he echoed recent comments from top ECB officials that the central bank was not locked on to a course of interest rate moves.

Like ECB President Jean-Claude Trichet, Hurley said there was "no-bias" one way or the other towards future moves but conceded that at a 16-year high of 4 percent in the euro zone and at similarly elevated levels in Ireland, inflation was "quite high."

"Controlling inflation is the best possible thing you can do to contribute to growth," he added.

In a near repeat of a speech he made at the end of last week, Hurley said that while euro area economic activity had so far remained robust, the U.S. and UK two of Ireland's key trading partners, had hit problems.

"Economic activity has remained stronger in the euro area, although an easing in the growth rate is expected in the short-term before a recovery towards its potential growth rate of about 2 per cent," he said.