MercoPress. South Atlantic News Agency

Euro zone inflation marks an all time annual high in Jan

Hikes in fuel and heating oil prices pushed the Euro zone 12 months rate of inflation to an all-time high in January, but a sharper than expected drop in core inflation added weight to the view that it will fall back closer to the European Central Bank's 2% target ceiling later this year.

Prices in the 15 countries that share the Euro rose at the fastest pace on record in the 12 months to January 2008, rising 3.2% on the year but dropping 0.4% over the month, data from the European Union's official statistics agency Eurostat showed Friday. Prices of fuels for transport rose 15% on the year, while heating oil costs rose 31%, pushing the overall annual rate to 3.2%, up from 3.1% in December and its highest level since Eurostat records began in 1997, the data showed. In contrast, the rate of core inflation - which excludes prices for energy, food, alcohol and tobacco - dipped to 1.7% on the year, from 1.9% in December - well below the 2% rate economists had predicted, reflecting shops' discounts and a slowdown in consumer demand. On the month, the core inflation rate dropped 1.1% - its largest decline in two years and a much steeper drop than the 0.6% decline economists had forecast. While the annual rate of inflation remains well above the ECB target of "below, but close to" 2%, the dip in the core rate will provide some comfort to those who are asking for lower interest rates. Following on the latest data analysts believe the ECB will adopt a "wait and see" attitude toward monetary policy. The ECB hasn't changed its main rate since June last year and is widely expected to keep it on hold at 4% when it meets next week. Member countries which in January accumulated a more moderate prices advance include Holland, 1.8%; United Kingdom, 2.2%; Germany and Portugal, 2.9%, while on the other extreme, Latonia, 15.6%; Bulgaria, 11.7% and Estonia, 11.3%.