EU inflation running at highest level for 30 months
Published 17/05/2011 | 05:00
INFLATION inside the euro area is running at its highest rate for two-and-a-half years. It increases the danger of more, and bigger, interest rate rises later this year.
Rates are expected to rise even though inflation in Ireland is under control.
Eurozone inflation rose to 2.8pc in April, the highest level for 30 months and up from 2.7pc in March, according to figures from Eurostat, the EU's official statistics agency. It comes despite the ECB saying it wants to keep inflation below 2.2pc. Economists expect to see the next interest rate increase announced in July.
Eurostat said transport costs were the biggest risers adding to the inflation figures. It said transport costs increased by 5.9pc in the year to the end of April. Housing rose 5pc. The statistics agency said clothes were the biggest movers in the month of April, rising 2.6pc.
There is little consistency to inflation within the eurozone. Inflation in Ireland is running at 1.5pc for the month and 0.4pc over the past 12 months, the lowest anywhere in the eurozone. Portugal's inflation is running at 4pc and Romania's at 8.4pc. Higher inflation could boost the euro, however.
Core inflation, which ex- cludes energy costs, rose by 0.5pc for the month and is up 1.8pc over the past year across the eurozone.
"The worrying thing is that core inflation is going up. This is a clear signal we will get more rate hikes," said Carsten Brzeski, economist at ING bank.
(Additional reporting Reu- ters)