Euro zone annual inflation level at 2.1%

Euro zone and European Union consumer prices rose an expected 0.3 per cent in February, for a year-on-year rise of 2

Euro zone and European Union consumer prices rose an expected 0.3 per cent in February, for a year-on-year rise of 2.1 per cent, the European Union's statistics office said today.

The February annual inflation rate is in line with initial estimates by economists, which they later revised to match the statistics office's estimate of 2.0 per cent from March 1st.

The rise brings inflation in the 12-nation euro zone above the European Central Bank's target of inflation below, but close to 2 per cent.

The bank has kept interest rates at historic lows of 2.0 per cent since 2003 amid slow economic growth, but ECB President Jean-Claude Trichet warned on Monday in his testimony to the European Parliament that inflation risks were on the upside.

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Euro zone growth is stifled by weak domestic demand, caused partly by a high unemployment rate of nearly 9 percent, and strong oil prices.

The strong euro also harms exports by making the bloc's products more expensive abroad.

But the German ZEW indicator showed on Tuesday that investor confidence improved unexpectedly to a six month high in March with expectations of higher euro zone inflation turning positive for the first time since December.

The ZEW indicator also showed a slight increase in expectations of an ECB rate rise over the next six months.

The statistics office said annual price growth was mainly fuelled by alcohol and tobacco which rose 7.2 per cent, housing, up 4.0 per cent and transport, which rose 3.7 per cent.

Prices of telecommunications, clothes, recreation and culture fell year-on-year. The month-on-month index was boosted mainly by fuel costs, vegetables and package holidays.