Central Banks

ECB warns governments to get set for higher rates

The European Central Bank says brace for higher taxes

The European Central Bank (ECB) is warning governments and other investors to get ready for higher interest rates.

ECB member Benoit Coeure told a finance conference Monday that a looming adjustment to the bank's monetary policy is transparent.

"It's obvious that the financial sector, and other economic actors and especially governments must prepare (for higher rates)," Couere told conference attendees.

"I hope that euro zone governments know that interest rates will not stay at current levels," Coeure added.

Recent spikes in the cost of French and German debt has been pinned on scarcity in the market, exacerbated by the ECB's continuous buying.

But Couere told the conference that he sees no evidence the central bank's stimulus policy is negatively affecting market activity.

"So far we see no evidence that the current constellation of interest rates bears risks or the smooth function of markets, nor to financial stability or the transmission of our policy," he said.

European Union flags in front of the headquarters of the European Central Bank in Frankfurt am Main, Germany.
Daniel Roland | AFP | Getty Images

In an interview published on the ECB website Monday, fellow ECB board member and the bank's chief economist, Peter Praet said that the bank was becoming more optimistic on the economic outlook for Europe.

"Incoming data are making us more confident that the economic expansion will continue to firm and broaden.

"But the important question is whether the adjustment of the path of inflation towards below, but close to, 2% would continue without our expansionary monetary policy," he said.

Praet said the bank's current monetary policy stance "remains appropriate".

Reuters contributed to this report

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