Berlin - European inflation rocketed upwards in March, data released Wednesday showed, as resurgent consumer prices around the world add to the pressures facing leading central banks as they attempt to head off slumping economic growth. With the European Central Bank having resolved to sit tight on interest rates in the face of renewed inflation, the euro soared to a new all-time high just short of 1.60 dollars Wednesday, while oil prices hit a record of more than 114 dollars a barrel.
The move by the European Union (EU) statistics office, Eurostat, to revise up last month's consumer prices to an annual 3.6 per cent in the 15-member eurozone means the ECB is now facing the buildup to the 10th anniversary of its founding with inflation at its highest rate since the euro currency bloc was forged.
"The ECB will delay longer moves to reduce interest rates," said Christoph Weil, economist with Germany's Commerzbank, following the release of the latest eurozone inflation data.
The decision to revise up the March eurozone inflation rate to 3.6 per cent from an earlier 3.5-per-cent estimate came amid signs of strong inflationary pressures around the world on the back of surging energy and food prices. Oil prices have jumped almost 80 per cent over the 12 months.
Data also released Wednesday showed inflation in China remaining at close to an 11-year high of 8.3 per cent with a jump in producer prices to faster-than-expected 1.1 per cent earlier this week raising concerns about the outlook for both consumer prices and interest rates in the US, the world's biggest economy.
Inflation in Japan has also been growing at its fastest rate in 10 years with Germany's statistics office saying Wednesday that European Union harmonized inflation in Europe's biggest economy jumped to 3.2 per cent in March from 2.9 per cent in February.
The climb in consumer prices helped to trigger a plunge this week in a key indicator measuring German investor confidence.
International Monetary Fund Managing Director Dominique Strauss- Kahn warned this month of "a risk of sustained high inflation" due to the rise in food, metal and energy prices over the past year.
The threat posed by inflation rates creeping up around the world came against the backdrop of forecasts that global growth would slip back a gear in the coming months as the ripples from US subprime mortgage market crisis and an expected US recession spread across the international economy.
With economists around the world having cut their global economic projections, the IMF said earlier this month it expects global growth to slow to 3.7 per cent in 2008 after rising by 4.9 per cent in 2007.
The Eurostat's decision to revise up the March inflation rate to 3.6 per cent from its earlier estimate of a 3.5 per cent helped to edge the eurozone's rate further away from the 2-per cent annual target set by the ECB. Inflation stood at 3.3 per cent in February.
While analysts believe eurozone inflation may now have peaked, they see it only slowly edging back down in the coming months. Milan- based Unicredit said Wednesday that it will take until the end of the year before eurozone inflation falls to below 3 per cent.
Annual inflation in the broader-based 27-member EU came in 3.8 per cent in March, up from 3.5 per cent in February, partly as a result of a sharp jump in consumer prices in several of the Brussels-based bloc's new Central European members.
While inflation in the two Baltic states of Latvia and Lithuania hit 16.6 per cent and 11.4 per cent respectively, annual consumer prices ion Bulgaria climbed to 13.2 per cent last month compared to 12.2 per cent in February.
However, analysts say that with inflation in Britain remaining stable at 2.5 per cent in March, the Bank of England could have room to move in trimming rates further to help counter a slide in economic growth in the country.
The Netherlands recorded the lowest annual March inflation rate in Europe with 1.9 per cent.
