Inflation in the European single currency area jumped to 3.6 per cent during May, up from 3.3 per cent in April. The figure matches the 16-year high seen in March and was slightly above market expectations.
The news dampens hopes that the European Central Bank might move to reduce interest rates next week. Recent robust growth figures, particularly for Germany, Europe’s largest economy, will also have discouraged policy makers from reducing rates when they meet on Thursday. The official interest rate in the eurozone has stood at 4 per cent since last June.
The ECB aims to keep consumer-price growth below 2 per cent, and said on Wednesday that there are signs inflation expectations "have been trending up recently". Inflation has been rising especially strongly in some eurozone nations.
Inflation has surged in Germany, to 3.0 per cent from 2.4 per cent, high by recent historical standards, while Belgium reported on Thursday that its annual inflation rate hit a 23-year high of 5.21 per cent in May.
Spanish inflation rose to 4.7 per cent, the highest for more than a decade. Also announced yesterday, the eurozone’s jobless rate was 7.1 per cent in April, unchanged from the previous month.
The ECB’s president, Jean-Claude Trichet, said yesterday that “we must take care that the current price shocks in oil and food don’t lead to price increases for other goods or to excessive wage deals, and thereby set in train a general wave of price and wage rises”.
The Frankfurt-based institution celebrates its 10th anniversary this weekend. While most observes agree that the euro has been a relatively successful enterprise, it is true that the ECB has failed to meet its inflation target for the last eight years.
The Bank of England has enjoyed a more successful record, though in its latest Inflation Report, published earlier this month, it concede that inflation would not return to target until 2011.