Joaquin Almunia, European Union Economic and Monetary Affairs Commissioner said today that euro zone inflation was likely to remain higher for longer than expected.
"Inflation is uncomfortably high in the euro area, as is the case in much of the rest of the world. The cost of oil has more than doubled over the last year while the price of a number of agricultural commodities has accelerated in parallel."
Mr Almunia said inflation was likely to remain at elevated levels for a longer period than expected and may only decline around the end of the year.
"Against this background, and given that growth should not be too far from potential, our first concern is to ensure that inflationary developments do not become entrenched."
"High commodity prices must not spill over into the wider economy and
lead to a price-wage spiral that would have very damaging consequences for our economies and citizens," he said.
"Once inflation gets out of control it is very difficult and costly to reverse the situation."
"The European Union is responding to the challenge of increasing commodity prices with a raft of initiatives cross cutting EU policy; these range from measures proposed in agriculture and transport to reinforcing our dialogue with oil producing countries."
"In addition, we are examining the transparency of oil markets and monitoring activities in commodity related financial markets, which may reflect some speculative behaviour," he added.
Agencies