Annual inflation in the euro zone jumped to a six-year high of 2.8 per cent in September, sharply up from August's 2.3 per cent and well above the European Central Bank's mid-term ceiling of two per cent, the Eurostat statistical agency said yesterday.
The rise in consumer prices was largely prompted by higher oil prices.
Excluding energy, core inflation was up to 1.6 per cent from 1.5 per cent in August. Energy inflation across the 11-nation zone rocketed to 16.0 per cent last month from 12.3 per cent in August. These latest inflation numbers - above economists' median forecast of 2.7 per cent in a Reuters poll - could put further pressure on the European Central Bank to raise interest rates, which have already risen seven times since last November. The current main rate in the euro zone is 4.75 per cent.
"The core inflation number is picking up . . .and we think (the harmonised rate) is going to be above two per cent for a long time," said Mr Tony Norfield at ABN AMRO in London.
"This is not good news for the ECB, that's for sure," said Mr Bernd Weidensteiner of DG Bank in Frankfurt, referring to the bank's medium-term ceiling of two percent inflation.
Mr Charles Diebel, fixed income strategist at Societe Generale Strauss Turnbull in London, said it would be interesting to see how long the ECB allowed inflation to be off target. "I don't think it suddenly means the ECB are going to hike rates, (but) it may throw some doubt on the concept that they are done," Diebel said.
Mr Stephen Hannah at IBJ International in London, said the data re-emphasised that euro zone monetary policy remained relatively accommodative with an upward bias on interest rates.
"The core inflation is edging up just slightly, but it probably doesn't alter the interest rate (and) exchange rate prospects very significantly," he said.
The Eurostat figures mirrored national data already published showing rising inflation, pushed up by high fuel costs and the euro's low rate of exchange.
Earlier yesterday Italian consumer inflation came in at 2.6 per cent in the year to September, in line with forecasts and the third month in a row that CPI has been at that rate after peaking at 2.7 per cent in June.
"We expect this to be the peak unless oil prices have a big surprise, and given the situation in the Middle East, you never know," said Mr Silvia Pepino, economist at JP Morgan in London, who expects October CPI to come in at 2.5 per cent.
Ireland's Consumer Price Index rose to an annual 6.2 per cent in September, the third consecutive month at that level.
The figure - at the top of the euro zone's inflation league - was below analysts' forecasts of 6.4-6.5 per cent.
The harmonised index of consumer prices (HICP), used for intra-European Union comparison, rose 5.5 per cent year-on-year in September, down from 5.7 per cent in August.
Rising fuel also ignited Austrian inflation to a six-year high in September, prompting the Central Statistics Office there to warn that consumer prices would likely remain at high levels.
Preliminary figures showed the consumer price index rose to 3.0 per cent in September over the year-ago level after rising to 2.7 per cent year-on-year in August. The last time inflation topped three per cent was in September 1994. Much of the September increase was due to higher oil prices which were 19 per cent more expensive than in August.
Annual inflation across the broader 15-nation European Union rose to 2.5 per cent from 2.0 per cent in August.
