Inflation at new high in eurozone

Inflation in the eurozone rose to 2.8 per cent in April, official data revealed yesterday, its highest level since October 2008.

While inflation was up only marginally compared to March's rate of 2.7 per cent – and still some way below the UK's figure of 4 per cent – the increase will concern the European Central Bank, which has become increasingly nervous about price rises during the first few months of the year.

Earlier this month, the ECB raised eurozone interest rates to 1.25 per cent from the previous record low of 1 per cent, but the latest data may prompt it to consider further increases in the cost of borrowing.

Howard Archer, chief UK economist at IHS Global Insight, warned it was not only high energy prices causing the problem: "It is very possible that core eurozone inflation rose further in April after rising to 1.5 per cent in March from 1.1 per cent in February," he said.

However, the ECB is also conscious of the eurozone's economic problems. Spain revealed yesterday that its unemployment has now hit 4.9 million, 21.3 per cent of the working population.