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Euro-zone inflation challenges ECB monetary policy

Sunday, January 6th 2008 - 20:00 UTC
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Record oil prices and continuing high food costs kept Euro zone inflation at 3.1% in December, reported the European Central Bank (ECB).

The figure, which applies for the nations that share the Euro, was the same as November, when it represented a more than six year high. The 3.1 percentage is above the ECB 2% target and the Bank faces the delicate task of cooling inflation without hurting the economy. The ECB has kept interest rates on hold at 4% since June. Before the global credit crunch hit in late August, the ECB had been widely tipped to raise rates to cool inflation. Yet with signs that the lack of global credit was hurting European firms and consumers already suffering from higher energy bills, the ECB has held off any change. While any rise in interest rates would inevitably cool inflation, it would worsen matters for companies and households.

Categories: Economy, International.

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