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Eurozone inflation hits 4%



Country:  France; Italy; Portugal; Spain

30 June 2008

Annual inflation in the eurozone is rising at 4%, the highest rate since statistics began in 1997, a further indication that the European Central Bank (ECB) will raise its main rate from 4 to 4.25% on Thursday.

Eurostat, the European Union’s statistics office, announced that the annual rate of price rises jumped from 3.7% in May to 4% in June, twice as high as the ECB’s target of under 2%. Record-high energy prices are the main reason for the hike.

Howard Archer, economist at Global Insight in London, said Eurostat’s data “surely rubber-stamps” an interest-rate increase to 4.25% on Thursday and “is likely to fuel expectations that interest rates will rise higher still.”

Editor’s comment:
Money-market rates last week showed investors were betting on further rate rise. If rates do appreciate, then this is likely to strengthen the euro currency further against the UK pound, making the cost of buying a property in the 15-nation bloc more expensive.

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