Interest rates will rise next week as euro inflation climbs

Saturday, 2 April 2011 00:01 - - {{hitsCtrl.values.hits}}

BRUSSELS: Inflation surged across the debt-ravaged eurozone in March, official data showed, raising the prospect of the first interest rate hike by the European Central Bank for two years.

The annual rate of inflation across the eurozone accelerated to 2.6 per cent in March, the EU’s Eurostat agency said as fears mount among economists that rising prices could put a brake on European economic growth.

The news “effectively rubber stamps an ECB interest rate hike from 1.00 per cent to 1.25 per cent at its April 7 meeting,” said London-based IHS Global Insight specialist Howard Archer.

Up from 2.4 per cent in February, the rate is now significantly above the ECB’s hopes for medium-term inflation at below two per cent across the 17-nation currency area.

March marks the fourth successive month above that target.

And after the rate “rose more than expected as it reached a 29-month high,” central bank policymakers will be forced to act to prevent the spike in oil prices at a time of military conflict in Libya feeding through the prices on Main Street, Archer explained.