Europe producer-price inflation accelerates

London: European producer-price inflation accelerated to the fastest in more than two years in February, led by increasing energy costs, adding to pressure on the European Central Bank to raise key interest rates.

Factory-gate prices in the euro region jumped 6.6 per cent from a year earlier, the fastest since September 2008, after increasing a revised 5.9 per cent in January, the European Union's statistics office in Luxembourg said Monday. Economists forecast an increase of 6.7 per cent, the median of 18 estimates in a Bloomberg survey showed. In the month, prices advanced 0.8 per cent.

Strong vigilance

Crude oil prices have surged 21 per cent over the past three months, adding pressure on companies to pass on higher costs just as the recovery falters. European economic confidence weakened in March and manufacturing growth slowed.

Still, ECB President Jean-Claude Trichet has signalled that policy makers are more concerned about rising price pressures than slowing growth, calling for "strong vigilance" last month.

Energy prices jumped 13 per cent in February from a year earlier and the cost of intermediate goods rose 8.1 per cent, the statistics office said in Monday's report. Excluding construction and energy, producer prices advanced 4.5 per cent in the year. In the 27-nation EU, producer-price inflation accelerated to 7.1 per cent in February from 6.4 per cent in the previous month.

Key rate

The Frankfurt-based ECB will probably raise its key rate by 25 basis points to 1.25 per cent when policy makers meet on April 7, according to a Bloomberg survey.

The central bank last month forecast consumer-price inflation to average about 2.3 per cent this year, above the bank's limit of 2 per cent.

Expensive:

21% rise in crude prices over three months

7.1% acceleration in February's producer-price inflation

25 - expected rise in ECB rate, in basis points