WRAPUP 1-ECB tough on inflation, Mersch rules out rate cut

By David Milliken

FRANKFURT, April 14 (Reuters) - European Central Bank policymakers kept their tough line on inflation after meeting other central bankers and politicians at the weekend, and Governing Council member Yves Mersch explicitly ruled out cutting interest rates.

Although the Group of Seven major industrial economies ramped up their verbal offensive against currency volatility, ECB officials were in no mood to tone down inflation warnings which have pushed up the euro against the dollar in recent months.

Mersch, who heads the Luxembourg central bank, was the most explicit in saying that the inflation situation was too dangerous for lower interest rates any time soon.

Asked if he agreed with the International Monetary Fund's view that the ECB had room to lower rates this year, Mersch told news agency Bloomberg that it is "certainly not within the time horizon we're talking about for the current year".

Bundesbank President Axel Weber made a similar point on Friday before the start of IMF and G7 meetings in Washington.

Dutch central bank chief Nout Wellink told Reuters late on Sunday that commodity prices made it hard to be certain that inflation would fall back towards 2 percent at the end of the year.

"From the forecasts I know, according to these forecasts, inflation will come back to let me say around two percent only at the end of the year, the beginning of next year," he said.

"But these are forecasts. I find it extremely difficult in present circumstances to be precise on this because inflation is determined to a great extent by what is happening in commodity markets, where there is quite a lot of speculation as you know."