The rate of price growth in the 17 countries that share the euro jumped to a higher level than had been anticipated to reach the highest level in almost two and a half years, increasing pressure on policymakers to contain inflationary pressure, according to Financial Times. On Thursday, the European Union reported that inflation in the eurozone spiked to 2.6% in March from the 2.4% annual rate recorded the month prior, marking the highest level since October 2008. The increase was driven by volatile food and energy cost increases, leaving core inflation at an annual rate of 1% in recent months’ although data was not available for March.
The report increases pressure on the European Central Bank to raise interest rates at the monthly policy board meeting next Thursday, when economists are forecasting that policymakers will increase the primary interest rate by a quarter point from 1% currently. The central bank aims to keep inflation “below but close to” 2%, and officials are becoming increasingly worried that even temporary inflationary surges could lead to an entrenchment in “second round” effects such as wage increases. Peter Vanden Houte of ING said the trend for even core inflation “is now clear upwards,” and added that he expects core inflation to move as high as 1.5% by the end of the year.