Price rises continue for Europe

Many observers say that the era of cheap food has come to an end

European consumers are suffering the highest price rises in more than six years, it was confirmed on Wednesday.

Inflation across the countries that use the euro hit 3.1% in December, the highest rate since May 2001, the Eurostat statistical office said.

Foods, including milk, bread, cheese and cereals, were blamed for the rise.

While food prices are expected to rise further this year, economists said that overall inflation probably will slow due to a decline in energy costs.

Luigi Speranza, an economist at BNP Paribas said that: "December's rate is likely to be the peak for this cycle."

Mr Speranza said that inflationary pressures would be helped by a decline in energy costs and the diminishing effect of value added tax increases that were introduced at the start of 2007.

The European Central bank will be hoping inflation does fall, as it has been in a very difficult position over the last few months, analysts said.

Inflation is currently way above its target rate of 2%, but there is growing evidence that the world economy is slowing down and the US may be heading for a recession.

Usually, the ECB would raise interest rates to help tame inflation, however, it is reluctant to do that as the outlook for global growth is uncertain, analysts said.

Wednesday's inflation report from Eurostat confirmed its estimate made earlier this month.