Eurozone Inflation Hits 6-year High

Eurozone inflation hit 3.1 per cent in November, the highest for more than six years, according to revised figures that will encourage the European Central Bank to keep talking tough on future interest rate moves.

Preliminary figures had shown an annual inflation rate of 3 per cent, up from 2.6 per cent in October.

The upwards revision highlights the impact of the global surge in oil and food prices. The ECB describes the increase as a hump” that will subside next year, but Jean-Claude Trichet, ECB president, has admitted that the upswing is proving larger and longer lasting than expected. The central bank’s fear is that current higher rates will feed through into higher wage demands, raising longer-term inflation pressures.

Earlier this month, Mr Trichet disclosed that some ECB governing council members had favoured raising official interest rates from the current 4 per cent.

ECB forecasts show eurozone inflation returning back within its target of an annual rate below but close” to 2 per cent in 2009. But Yves Mersch, Luxembourg’s central bank governor, warned that the forecasts assumed that higher oil and food prices would not push up wage settlements. "This is another major risk," he said.

Details of the latest figures showed inflation lowest in the Netherlands and Finland, which had rates of 1.8 per cent and 2.1 per cent, and highest in Slovenia and Spain, at 5.7 per cent and 4.1 per cent.

Core” inflation, which excludes volatile food and unprocessed food prices, in the 13-country eurozone surged from 2.1 per cent in October to 2.3 per cent in November, the highest since September 2002.

Eurozone Inflation Hits 6-year High

Financial Times
12/14/2007 6:45:08 AM