Page last updated at 10:11 GMT, Wednesday, 16 April 2008 11:11 UK

Fresh jump in eurozone inflation

Woman speaks on her phone next to currency exchange signs
Goods are getting more expensive across Europe

Surging food and fuel prices pushed up annual inflation in the eurozone to a record 3.6% last month, official figures have shown.

March's figure was sharply ahead of February's 3.3% number and was also higher than the initial 3.5% estimate.

Inflation varies significantly in the 15 states that use the euro, from 6.6% in Slovenia to 1.9% in the Netherlands.

The latest figures pushed the euro to yet another high against the US dollar, making it worth $1.5947.

The euro has been boosted by the European Central Bank's (ECB) concerns about inflation and its unwillingness to cut interest rates from their current 4% mark.

IMF worries

At 3.6%, inflation is considerably above the central bank's 2% target.

It is under growing pressure to cut the cost of borrowing to give the slowing eurozone economy a boost, but it has, so far, refused to be diverted from its anti-inflationary path.

The International Monetary Fund recently downgraded its growth forecasts for the eurozone to 1.4% in 2008 and 1.2% in 2009.

Consumer price inflation will go down like a lead balloon at the ECB
Howard Archer, Global Insight

At the same time, it argued that the ECB had scope to relax its monetary policy, which has remained unchanged for nearly a year.

But one economist said the latest inflation numbers meant that rate cuts would be off the ECB's agenda for most of 2008.

"Consumer price inflation will go down like a lead balloon at the ECB and undermines already limited hopes of an interest rate cut in the near term," said Howard Archer, chief european economist at Global Insight.

Policymakers were worried about the prospect of inflation-busting pay settlements in France and Germany and the rising cost of manufactured goods across Europe, he added.

Consumer price rises are now at a 12-year high in France, its statistics agency revealed on Tuesday, rising 3.5% last month.


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