Don't expect an interest rate cut soon from the European Central Bank as surging energy and food prices pushed euro zone inflation to a new record high in March compared with the same month a year earlier. That is according to revised figures from the European Union's statistics office.
Inflation has risen steadily from 3.1% last December to 3.6% in March. In March 2007, inflation stood at 1.9%.
European Commission spokeswoman Amelia Torres expressed concern about the knock-on effect: "It is very important that these price increases don't feed through to further higher prices and wages, of course, wage increase shouldn't be more important than productivity rates in order not to start a inflationary spiral which would be the worst of outcomes and would not benefit anyone."
As the European Central Bank's main task is limiting inflation it is much less likely there will be an early cut in the cost of borrowing.
Economists said this level of inflation erodes euro zone consumers purchasing power, reducing domestic demand at a time when exports are suffering from the record strong euro.
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