Euro zone inflation jumps in January

Euro zone inflation jumped more than expected in January, rising well above the European Central Bank's target in what is likely to fuel market speculation the ECB might have to raise interest rates sooner than thought.

The European Union's statistics office Eurostat estimated today that consumer prices in the 17 countries using the euro rose 2.4 per cent year-on-year in January after a 2.2 per cent rise in December. Economists polled by Reuters had expected a 2.3 per cent rise.

The ECB wants to keep inflation below, but close to 2 per cent. No monthly figure or breakdown of the year-on-year estimate was available from Eurostat, but economists have blamed higher inflation mainly on more expensive energy and food.

The ECB has said it expected prices to grow faster than its target in the coming months, peaking at 2.4 per cent in March and then subside again.

European Central Bank Governing Council member Ewald Nowotny said last Tuesday he did not expect a decision to raise interest rates in the first half of the year.

Many economists expect the ECB would only raise interest rates from the current record low of 1 per cent in late 2011, and some even say a rate rise may happen only in early 2012.

Reuters