European inflation accelerated to the fastest in more than two years in February, increasing pressure on the European Central Bank to raise interest rates.

Inflation in the 17-nation euro region quickened to 2.4 per cent from 2.3 per cent in January, the European Union's statistics office in Luxembourg said today, confirming a March 1st estimate. That's the fastest since October 2008 and exceeded the ECB's 2 per cent limit for a third month.

Labour costs rose 1.6 per cent in the fourth quarter from a year ago, after increasing 0.9 per cent in the third quarter, a separate report showed. Crude oil prices have surged 7.5 per cent this year, adding pressure on companies to pass on higher costs as labour unions seek more pay.

While the ECB signalled on March 3rd that it may raise borrowing costs as soon as April to fight price pressures, the aftermath of Japan's earthquake has since clouded global growth prospects and eroded investor confidence.

"Euro-region inflation will remain above 2 per cent," said Mario Jung, an economist at BHF Bank AG in Frankfurt. "Japan has increased uncertainty and the global economy could lose some dynamic, but I still expect the ECB to raise borrowing costs next month unless there's a total catastrophe."

Euro-region consumer prices rose 0.4 per cent from January, today's report showed. Inflation accelerated in euro-region countries including Germany, Ireland, Spain, Italy, Luxembourg and Finland. It slowed in Belgium and Greece.

Reuters