Euro zone inflation jumped to a new record high of 4 per cent in June, data showed today, surprising markets and cementing expectations of a European Central Bank interest rate hike this week despite slower growth.
Euro zone interest rate futures extended falls and short-dated bond yields rose after the data.
The 4 per cent year-on-year figure for price growth in the 15-nation euro in June represented a leap from May's 3.7 per cent, moving further from the ECB's target of just below 2 per cent, European Union statistics office Eurostat said.
It was the highest inflation figure for the currency area since measurements started in 1997.
Analysts polled by Reuters had expected June inflation to rise to 3.9 per cent, boosted by growing energy and food prices.
ECB officials have given clear signs that the bank will increase its main interest rate by 0.25 percentage point to 4.25 per cent at its Governing Board's meeting on Thursday.
Central bankers attending talks at the annual meeting of the Bank for International Settlements yesterday issued a stern warning against the dangers of surging inflation, although there was no one-size-fits-all solution.
Oil prices rose today, climbing near Friday's record high $142.99 a barrel. But ministers from Germany, Spain and France warned the ECB at the weekend against measures that could stifle the economy.