European Producer-Price Inflation Accelerates to 6.1%
European producer-price inflation accelerated to the fastest in more than seven years in April, intensifying pressure on the European Central Bank to keep interest rates on hold.
Factory-gate prices in the euro region rose 6.1 percent from a year earlier, the most since October 2000, after increasing 5.8 percent in March, the European Union statistics office in Luxembourg said today. The April rate matched the median forecast of 25 economists in a Bloomberg News survey.
Soaring food and energy costs are boosting expenses for companies across Europe, prompting them to pass on price increases to consumers and keeping euro-area inflation above the central bank's 2 percent ceiling. ECB President Jean-Claude Trichet said June 2 that there is “no time for complacency'' on inflation, which was at 3.6 percent in May at the consumer level, the fastest since the euro's inception in 1999.
“The inflation outlook has sharply deteriorated over the past few months,'' Klaus Baader, chief European economist at Merrill Lynch & Co., said before today's report. He expects the ECB to leave rates on hold through 2009, while adding that the risk of rate increases “in the not-too-distant future has clearly increased.''
Energy-price inflation accelerated to 14.3 percent in April from 12.7 percent in March, the statistics office said today payday loans. Crude oil, which has gained 92 percent in the last 12 months, rose to a record above $135 a barrel last month.
Corn, Rice
Food-price inflation was at 9.8 percent at the producer level in April, staying close to the 10 percent rate reached in March. Corn prices have risen 60 percent in the last 12 months, while rice has soared almost 90 percent.
The euro area's 3.6 percent consumer-price inflation rate compares with the ECB's definition of price stability of inflation close to, but below, 2 percent. With inflation above that limit, ECB policy makers will probably leave the bank's key rate on hold at 4 percent at their next meeting on June 5, according to all 55 economists in a Bloomberg survey. The central bank will also publish new staff forecasts for economic growth and inflation.
“The present price hikes are a timely reminder that, when it comes to inflation, complacency is out of place,'' ECB council member Axel Weber said on May 30. “We cannot rest on our laurels where credibility is concerned.''
Filed under: term by Finance Boss