Euro inflation up to a 16-year high

European inflation is growing at its fastest pace for over 16 years, which has left the European central bank with an even larger mountain to climb as unemployment is also on the rise, since Eurostat revised its May unemployment number up from 7.2% to 7.3%.

Inflation is now running at 4.0% which is well above the European Central Bank’s (ECB) 2% target.

Spain is the hardest hit nation in the euro zone, where unemployment soared to 10.7%.

Ireland also saw a major increase in unemployment as they reported a figure of 5.7 percent last month, whilst the euro zone’s largest economy, Germany, revealed a jobless rate of 7.3%.

There is also turbulence in the labour market as espoused by the ground staff at German airline Lufthansa AG having gone on strike seeking a 9.8% pay increase.

Last month, the ECB reacted to control inflation by increasing its key interest rate to 4.25% from 4%, which is the first move this year in a bid to control the impact of rising food and fuel costs.

There is a huge concern about inflation, although oil prices are still hovering around their peak, coupled with the downward momentum in economic activity, it is most likely that interest rates are to be held for the rest of the year.

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