Inflation in the Eurozone has rocketed to a disappointing twelve year high…

According to the Eurostat statistical office, Inflation in the eurozone has soared to a record level in the midst of higher fuel and food costs. The annual inflation rate in zone hit 3.7% in May - the highest since 1996 and up from 3.3% in April.

A spokesperson for Eurostat commented: “The main driver of inflation last month was an increase in food prices, which were up 6.4%, and transport costs, which were 5.9% higher. Central banks around the world have been struggling to keep inflation under control as food and oil prices rise. This has led to growing pressure to increase interest rates to counteract the rise of inflation”.

Inflation the ‘main concern’

Amelia Torres, spokeswoman on economic and monetary affairs for the European Commission, was concerned by the rise: "It's going up. It's not a good figure. Inflation is our main concern (as) regards the economy at the moment”.

Earlier this month the European Central Bank decided to hold interest rates for the Euro bloc at 4%, but ECB President Jean-Claude Trichet hinted an increase in interest rates was "possible" at its next meeting: "We considered - it is not excluded - that after having carefully examined the situation, we could decide to move our rates [by] a small amount in our next meeting in order to secure the solid anchoring of inflation expectations”.
 
The figures complicate the ECB's task of keeping inflation under control in the face of an increasingly downbeat outlook for the eurozone economy. Jennifer McKeown at consultancy Capital Economics. Concluded: "A rate increase next month looks like a done deal but the fact that core inflation remains subdued supports the view that the move will be a one-off”.