Saturday, April 30, 2011

Eurozone inflation rises to 2.8%

29 April 2011 Last updated at 12:25 German petrol prices High energy prices have contributed to the increase in the rate of inflation The eurozone's inflation rate edged up to to 2.8% in April from March's figure of 2.7%, according to official data from Eurostat.

The increase takes inflation further away from the European Central Bank's target of just below 2%.

The cost of raw materials and high energy prices have contributed to the increase.

The ECB started raising rates in April from their record low, with a quarter point increase to 1.25%.

The rise in the inflation rate will put pressure on the ECB to raise interest rates further.

"It's slightly higher than consensus but that wasn't a complete surprise. We saw from Germany and Spain, which already published numbers, that it could go this way," said Piet Lammens, economist at KBC.

"However, I can imagine that some market participants will expect the rate increase by the European Central Bank at an earlier date. We expected June, the market is still expecting July. I guess the consensus will now move to June," he added.

However, policymakers at the ECB will also be keenly aware of the austerity measures in countries such as Greece, the Irish Republic and Portugal.

If rates in such countries were to rise, on top of the austerity measures being implemented, the return to growth for the eurozone as a whole might be threatened.

View the original article here

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