Euro zone inflation hits 2.1%

A jump in oil and food prices took September euro zone inflation above the ECB's target for the first time in a year.

A jump in oil and food prices took September euro zone inflation above the ECB's target for the first time in a year.

The European Union's statistics office confirmed that consumer prices in the 13 countries using the euro rose 0.4 per cent month-on-month for a 2.1 per cent year-on-year rise, up from 1.7 per cent in August.

That was in line with market expectations based on Eurostat's earlier estimate.

The European Central Bank wants to keep annual inflation just below 2 per cent and did so during the 12 months to August, raising interest rates amid an economic upswing to the current 4 per cent from 2 per cent in 2005.

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Many economists believe the bank will not raise rates further because of the strong euro and an expected economic slowdown, partly due to the global credit crunch, which has already sharply boosted market lending rates.

The bank has said inflation risks remain on the upside. Some ECB officials have said the credit crunch has only postponed another rate rise, and markets expect inflation to stay above the ECB target for months.

Eurostat said without volatile energy and unprocessed food prices, or what the ECB calls core inflation, inflation was 0.4 per cent month-on-month and 2 per cent year-on-year, stable against August.

Energy prices jumped 0.6 per cent month-on-month and 3 per cent in annual terms in September, Eurostat said. Food, alcohol and tobacco cost 0.5 per cent more on the month and 2.7 per cent more than in September 2006.