($MACRO) European Central Bank President Jean-Claude Trichet signaled the ECB may reconsider its longstanding warnings about inflation, potentially setting the stage for a lengthy pause in its rate-increase cycle.

In testimony to the European Parliament, Mr. Trichet also played down the risks of a renewed recession in the euro bloc, saying he expects growth in the common-currency area to continue at a "modest pace."

While euro-zone inflation is likely to remain above the bank's 2% target in the months ahead, "risks to the medium-term outlook for price developments are under study in the context of the ECB staff projections that will be released in early September," Mr. Trichet said.