Eurozone inflation sharply up to 1.5%

The annual inflation rose sharply in the 16-nation eurozone to 1.5 per cent in March, according to official estimates released yesterday.

The unexpectedly high flash estimate, by the EU's Eurostat agency, showed a significant rise on the 0.9 per cent inflation recorded in February.

Analysts polled by Dow Jones Newswires had expected inflation to hit a more modest 1.2 per cent in March.

It is the highest eurozone inflation rate since December 2008 and moved the figures closer to the European Central Bank's target of close to but below two percent.

Eurozone inflation has risen, almost continuously, since standing at 0.5 per cent last November, as the bloc emerges from the worst recession since the 1930s.

Before that there were months of negative inflation. One of the most striking changes for the consumer is rising petrol prices, though Eurostat provided no breakdown of the figures.

"It is likely that energy and food related base effects have played a key role in pushing up inflation," said CIB BNP-Paribas economist Clemente De Lucia.

However, inflationary pressures should remain weak, he added.

"In particular, core inflation, which accounts to around 70 per cent of the headline inflation should have stabilised at its record low of 0.8 per cent and it should continue to ease over the coming months as excess of spare capacity combined with weak domestic demand will exert downward pressures on inflation," he said.

Moreover, the rising jobless toll, with 10 per cent unemployed in the eurozone, "should limit wage growth, one of the main drivers of inflation."