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European Central Bank president Jean-Claude Trichet has been praised over the past year for his firm grip on monetary policy. While the Federal Reserve went into a rate-cutting frenzy in the face of the credit crunch, with the Bank of England following suit with its own reductions, the ECB has remained steady, taking heed of rising inflation in its member states.

It is now well positioned to tackle the growing problem of inflation, with Mr Trichet hinting at the possibility of a rate increase in July to help bring inflation back closer in line with its 2 per cent target. The US, meanwhile, is feeling the effects of slashing its key interest rate to 2 per cent in an attempt to ward off recession, and it is unclear how the Fed is going to tackle the inflation issue.

Mervyn King at the Bank of England, in spite of holding rates, can also expect to dust off his notepad and pen to write another letter explaining why the UK has breached the 3 per cent inflation limit.

While eurozone inflation is at a 16-year high of 3.6 per cent, driven up by high levels in Germany in particular, the majority of members on the ECB board have expressed the opinion this is a short-term phenomenon and have publicly ruled out the possibility of a flurry of future rises.

Indeed the prognosis for the economy is positive, with the International Monetary Fund recently upgrading its growth forecasts for the eurozone. It now predicts growth across the 15 nations will average 1.75 per cent over 2008, when just two months ago it stated growth would be just 1.4 per cent. The IMF, however, has kept to its prediction of negligible growth of 1.2 per cent for next year, in sharp contrast to the 2.6 per cent growth experienced over 2007.

Enjoying its 10th anniversary last month, the ECB took over from the European Monetary Institute in overseeing, initially, the financial health of 11 nations. Since then this number has increased to 15, with the ascension of Greece in 2001, Slovenia in 2007, Cyprus and Malta in 2008. All members were undoubtedly pleased with the IMF’s conclusion that the monetary union had been a “distinct success” since it was established.