Euro inflation bounces back to 3.6 percent in May on surging food and energy prices.
Euro-zone inflation bounced back to a peak of 3.6 percent in May, the EU statistical agency Eurostat said Friday in its first estimate for the month. Surging energy and food prices saw the yearly inflation rate accelerate at the same pace in March, reaching a record high before it cooled to 3.3 percent in April.
High inflation in the 15 nations that use the euro currency is now Europe's biggest economic challenge as the European Central Bank stays away from pushing the main lever of economic growth -- changing interest rates -- and urges governments and employers to prevent an inflation spiral.
The ECB faces a dilemma because slashing interest rates -- as the U.S. Federal Reserve and Bank of England have done -- would likely fuel inflation. Inflation is now far above the ECB's recommended guideline of just under 2 percent.
But an ECB move to hike borrowing costs in order to cool high prices could hurt a slowing economy as the European Commission warns that countries using the euro face an "unusually uncertain" economic outlook this year in the wake of a global financial crisis, a possible U.S. recession and increasing energy costs.
The EU executive says the euro economy may only grow by 1.7 percent this year, well below last year's strong 2.6 percent as Europe reaped export orders from a booming world economy and saw sluggish household spending start to pick up.
ECB President Jean-Claude Trichet says keeping prices stable is his priority and this would not risk growth or jobs. So far unemployment in the euro-zone isn't budging from an all-time low. It was 7.1 percent in April, the same level it has stayed at since December 2007.
But economic confidence in the region is at its lowest level in nearly three years as consumers and businesses are downbeat about future prospects. People are paying more at the grocery store and at the gas pump -- while Trichet and euro governments urge employers not to grant large pay hikes that could drive prices higher.
French President Nicolas Sarkozy this week urged euro governments to consider slashing sales tax on fuel to ease the burden on consumers -- something EU officials were cool on, warning this risked distorting competition across the economy. Inflation in the euro-zone is now running at the highest since Eurostat started keeping records for each nation in 1996.
Euro-zone inflation bounced back to a peak of 3.6 percent in May, the EU statistical agency Eurostat said Friday in its first estimate for the month. Surging energy and food prices saw the yearly inflation rate accelerate at the same pace in March, reaching a record high before it cooled to 3.3 percent in April.
High inflation in the 15 nations that use the euro currency is now Europe's biggest economic challenge as the European Central Bank stays away from pushing the main lever of economic growth -- changing interest rates -- and urges governments and employers to prevent an inflation spiral.
The ECB faces a dilemma because slashing interest rates -- as the U.S. Federal Reserve and Bank of England have done -- would likely fuel inflation. Inflation is now far above the ECB's recommended guideline of just under 2 percent.
But an ECB move to hike borrowing costs in order to cool high prices could hurt a slowing economy as the European Commission warns that countries using the euro face an "unusually uncertain" economic outlook this year in the wake of a global financial crisis, a possible U.S. recession and increasing energy costs.
The EU executive says the euro economy may only grow by 1.7 percent this year, well below last year's strong 2.6 percent as Europe reaped export orders from a booming world economy and saw sluggish household spending start to pick up.
ECB President Jean-Claude Trichet says keeping prices stable is his priority and this would not risk growth or jobs. So far unemployment in the euro-zone isn't budging from an all-time low. It was 7.1 percent in April, the same level it has stayed at since December 2007.
But economic confidence in the region is at its lowest level in nearly three years as consumers and businesses are downbeat about future prospects. People are paying more at the grocery store and at the gas pump -- while Trichet and euro governments urge employers not to grant large pay hikes that could drive prices higher.
French President Nicolas Sarkozy this week urged euro governments to consider slashing sales tax on fuel to ease the burden on consumers -- something EU officials were cool on, warning this risked distorting competition across the economy. Inflation in the euro-zone is now running at the highest since Eurostat started keeping records for each nation in 1996.
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