European inflation should fall by the end of the year, European Commissioner Mr Pedro Solbes said today.
But he said Europe still faced inflationary risks from a rise in the price of crude oil and the depreciation of the euro against the dollar.
Mr Solbes said there were no technical reasons why there should be a rise in prices from the launch of euro coins and bills in January 2002. Some analysts have feared prices could rise as local currencies were swapped for euros and exchange rates were rounded upwards to simplify the move.
"If the rounding-off model is applied correctly, it should leave us with inflation that is practically neutral," he said.
Eurostat data released last week showed inflation in the 12-nation euro currency zone hit an eight-year high of 3.4 per cent in May. It was the 11th month in a row that the rate was above the European Central Bank's two per cent ceiling.
But central bank chief Mr Wim Duisenberg said it was not unlikely the May figure represented a peak in the current cycle. He expressed confidence inflation would fall below2 per cent next year.