The European Central Bank will follow a planned increase in interest rates next month with further rises in 2006, economists said at the weekend after Friday's announcement by Jean-Claude Trichet, ECB president, that a monetary tightening exercise was finally under way.

However, the fragility of the eurozone economic recovery means the number of rate increases may be limited. The risk is that higher interest rates will slow the eurozone's recovery and prompt a political backlash. Premature action that had to be reversed would undermine the ECB's credibility.