Inflation in eurozone at new high

Inflation in the euro area has risen to 4%, increasing the prospect of the European Central Bank (ECB) raising interest rates later this week.

June's annual rate of inflation was up from 3.7% in May and ahead of analysts' forecasts of a 3.9% increase.

Rising food and fuel prices are at the root of inflationary pressures which have sparked protests by hauliers, fishermen and farmers across Europe.

Experts expect the ECB to lift rates by a quarter point to 4.25% on Thursday.

'A shocker'

Should they do so, it would be the first increase in the cost of borrowing across the 15-member eurozone since June 2007.

ECB president Jean-Claude Trichet hinted last month that a rate hike might be imminent as inflation accelerates further away from the ECB's 2% target.

"It is clearly going to rattle the ECB further"
Gilles Moec, Bank of America

The annual rate is now higher than at any time since official records began in 1996.

Escalating fuel costs, a product of the relentless rise in oil prices above $140 a barrel, have pushed up inflation in leading economies such as Germany, France and Spain.

At the same time, growth is slowing across the single currency bloc.

Economists said the figures were likely to force the ECB's hand over rates.

"It is a bit of a shocker," said Gilles Moec, an economist with the Bank of America.

"It is clearly going to rattle the ECB further. It certainly plays into the hands of the hawks on the ECB governing council."

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