European Producer Prices spiraling

European producer-price inflation accelerated in the last month to the fastest pace in over 12 months.

The European Central Bank now more than ever must make a firm decision about interest rates as signs indicate towards the situation becoming increasingly dire.

Factory-gate prices rose 5.3 percent from the previous year whilst the European economy will slow to a predicted 1.7 percent down from 2.6 percent, which will boost inflationary pressures.

According to Martin Van Vliet, an economist at ING Bank in Amsterdam “will need to see much more evidence of commodity prices easing before they even start to consider curbing their hawkish rhetoric.”

This is a well publicized concern especially when considering the fact that oil prices have now broken the psychological barrier of $100 a barrel, to the point that in February a record price of $111 was set.

Both oil and food prices have pushed consumer-price inflation by 3.5 percent, well above the central banks 2 percent ceiling.

Currently the high levels of inflation are actually preventing the European Central bank from cutting interest rates even though the economy itself is cooling as policy makers are aware that it is important to anchor to freeze key commodity prices before interest rate can be changed a view espoused by ECB council member Christian Nover his speech yesterday.

Story link: European Producer Prices spiraling