Page last updated at 08:54 GMT, Wednesday, 11 June 2008 09:54 UK

New warning over French inflation

French fishermen protest against rising fuel prices
Rising prices have sparked protests across Europe

Inflation will continue to rise in France, economists have warned, after figures showed an above-forecast increase in consumer prices in May.

On a monthly basis, inflation rose 0.6% last month, driven by higher food and fuel costs, while prices are now 3.7% higher than a year ago.

Economists warned that with global oil prices rising to unprecedented levels, inflation had yet to peak.

The European Central Bank is now widely expected to raise rates this summer.

ECB action

ECB President Jean-Claude Trichet hinted recently that the central bank would take action soon to tighten monetary policy in the face of rising inflationary pressures.

We haven't reached the peak yet
Olivier Gasnier, Societe Generale

Experts believe it could raise rates from their current level of 4% as soon as next month with a further increase likely some time in the autumn.

Annual inflation across the 15-member eurozone is currently 3.6%, a situation which the International Monetary Fund recently said was "uncomfortable".

Rising fuel prices have sparked widespread protests across Europe in recent weeks, with hauliers and fishermen in France blockading ports and refineries.

The 0.6% increase in prices in May was slightly above analysts' forecasts of a 0.5% rise.

"Inflation will continue to be high in the coming months," said Olivier Gasnier, an economist at Societe Generale.

"We haven't reached the peak yet."

One positive aspect of the figures, analysts noted, was that underlying inflation - which excludes food and fuel prices - remained relatively stable.

This suggested that the impact of spiralling fuel and food costs had not really filtered through to higher costs in the rest of the economy.




SEE ALSO
French and Italian output shocks
10 Jun 08 |  Business
Euro inflation is 'uncomfortable'
02 Jun 08 |  Business
Trichet hints at future rate hike
05 Jun 08 |  Business

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