Inflation in the euro zone has jumped to an annual rate of 2.5 per cent this month on the back of higher oil prices, adding to the discomfort of the European Central Bank ahead of its rate-setting meeting next week.

The stronger-than-expected acceleration in inflation, reported by Eurostat, the European Union's statistical unit, comes amid mounting fears that high energy costs are slowing the euro zone's export-led economic recovery and preventing a pick-up in consumer spending.

Mr Nicolas Sarkozy, the French finance minister, yesterday said Paris had urged oil companies to limit retail price rises in efforts to soften the effects of higher crude oil prices.

"They are in complete agreement on the need to calm the oil market," he said in comments that reflected his concern that higher fuel bills could undermine his campaign to curb price rises and stimulate consumer spending.

Eurozone inflation has remained stubbornly higher than the ECB's price stability target of "below but close to" 2 per cent.

Nevertheless, the central bank is unlikely to act unless oil price effects feed through into wage demands or other price rises - of which there is no sign as yet.

Economists expect interest rates to be left at 2 per cent next Thursday for the 17th month running, with an increase unlikely until next year.

Eurostat gave no details about the factors behind the rise in the annual inflation rate, from 2.1 per cent in September to 2.5 per cent in October, but Ms Florence Barjou, economist at BNP Paribas, said: "Strong oil prices are certainly the main culprit." - (Financial Times Service)