Anticipation of inflation is a process whereby businesses and individuals take decisions in the expectation that inflation will rise.

"To be frank, I am very anxious about increasing inflation anticipation (on financial markets) in the eurozone," he said in speech here.

"We're going to have to do something about it," adding that the trend was most evident on the bond market.

The yield on the 10-year German Bund is now around 4.3 percent against 3.8 percent about three months ago. The OAT, a French equivalent, is at 4.35 percent against 3.85 percent a quarter ago.

Issing expressed concern over the current level of inflation in the 12-nation eurozone, noting that annual increases in consumer prices remain "stubbornly above two percent, which is a problem."

Eurozone inflation came to 2.4 percent in June after 2.5 percent in May, with the ECB predicting that it will stay above two percent until early next year.

The bank foresees 1.7 percent eurozone inflation in 2005 after 2.1 percent this year.

The ECB for the moment has shown no sign that it is about to follow the lead of the US Federal Reserve and tighten monetary policy. The guardian of the euro on Thursday left its benchmark interest rate at two percent but appeared to harden its position in vowing to remain "vigilant" in the face of possible oil-driven inflationary pressure.