Eurozone inflation accelerates to 2.4 percent

BRUSSELS: Eurozone annual inflation is expected to have shot up to 2.4 percent in January, the EU said Monday, fuelling household fears of an earlier rise in interest rates than previously thought.

The European Union Eurostat agency said the flash-estimate climb, from 2.2 percent in December, was almost certain to be confirmed in official figures next month, but the jump may alter European Central Bank rhetoric at its latest monthly meeting on Thursday.

The ECB's core target for economic management, inflation at or near, but not above 2.0 percent, has now been breached for the second successive month, and the eurozone figure comes on top of inflation in non-euro Britain topping  3.7 percent in December.

Economists have long predicted that rates would only rise later this year from the record-low 1.0 percent that has held for the last 22 months across the eurozone, and initial reaction on Monday left that view unchanged.

Blaming energy, commodity and food prices, London-based IHS Global Insight specialist Howard Archer maintained that while 2.4 percent is "at the top end of expectations," the ECB "seems prepared to look through this for now."

Budgetary tightening across almost all EU states is a key factor, likewise the fear that "an interest rate hike now would hobble Greece, Ireland and Portugal as they struggle with weak economies and difficult debt issues."

Overall, he insisted: "We believe that the lid will be kept down on underlying inflation by eurozone growth being relatively muted (amid) bumpy growth overall in 2011 and by persistently high unemployment."

Paris-based BNP Paribas analyst Clemente De Lucia also stressed that "domestic pressures are likely to remain moderate" and argued that "core inflation could be negative in Spain and Portugal in 2011 and approaching zero in Greece."