ECB policymaker Christian Noyer said on Tuesday that an explosive mix of soaring commodity prices and "permissive" monetary policy in some countries with dollar pegs could trigger an inflationary spiral which would hurt poor nations most.
Noyer, who sits on the European Central Bank's Governing Council, noted the cost of oil, food and other commodities was rising fast and the world environment had become very inflationary, in contrast to the price stability of past decades.
"And yet, in many parts of the world, monetary policies remain somehow permissive," he told a conference in Paris.
"The reason for this paradox can be found in the dilemma faced by many countries which maintain some link between their currencies and the U.S. dollar in order to prevent an unwanted appreciation of their exchange rate."
Such policies meant that some emerging market economies had interest rates which did not suit their economic conditions: "This situation could be very unstable and dangerous."
Noyer did not name any countries but Gulf Arab states, nearly all of which peg their currencies to the weak dollar, are suffering soaring inflation.
This largely forces them to track U.S. interest rate cuts even though their economies are booming.
China also links its currency to the dollar and is under pressure to let the yuan appreciate more.
Noyer said inflation in many emerging countries was accelerating and inflation pressures that were building up at a global level could develop further in the next few years.
"There is an explosive mix of rising commodity prices and permissive monetary policies, which could create an ongoing spiral and if it were allowed to develop, would specially hurt the poor countries, most of which are net food importers," he said.
"It is our joint and common responsibility to do everything in our power to avoid such an outcome."
Speaking on a panel with Cleveland Federal Reserve Bank President Sandra Pianalto, Noyer said the U.S. Federal Reserve and the ECB shared a philosophy of looking beyond short-term price shocks to the underlying trend in inflation.
However, interest rates had followed different paths in the two areas because of fundamental differences between the economic situation confronting the two central banks.
"The different policies that we have seen is just, and only, the result of objective differences in (the economic) situations," Noyer said.
He cited differences between the level of household indebtedness and developments in property prices.
He also said the euro zone appeared to face somewhat stronger risks of second round inflation pressures than the United States.
The U.S. central bank has repeatedly slashed rates, bringing its key target federal funds rate down to 2.0 percent.
The ECB has kept its key interest rate at 4.0 percent since June 2007.
Such widening interest rate differentials have been among the factors which have helped to drive the euro to successively higher record peaks against the dollar this year.
Neither Noyer nor Pianalto were willing to comment on exchange rate swings or central bank intervention.
"We, and I, certainly never comment either on the value of a given currency nor on intervention," Noyer told the conference in response to a question on the subject.