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Eurozone inflation threat grows
BRUSSELS, Belgium -- Eurozone inflation pressure mounted in September as consumer prices rose to the highest level in five months, suggesting interest rates will not be coming down any time soon despite concerns over a sluggish economy. The annual rate of inflation increased to 2.2 percent this month, compared to a 2.1 percent rise in August, the European Statistics office said on Monday. The September rise was the biggest since April, when it jumped 2.4 percent, and surprised economists who had expected no change in the rate -- even though many have acknowledged that higher oil prices, due to rising tensions in the Gulf, may now have fed down to consumers. September also marked the second month in a row that inflation topped the European Central Bank's target ceiling of 2 percent. The ECB has been coming under increasing pressure to lower interest rates as economic recovery slows in the 12 nations to share the single currency. The Group of Seven industrialised countries, meeting over the weekend in Washington, urged the ECB and other central banks to take action to stimulate growth. ECB President Wim Duisenberg has maintained the bank's key lending rate -- which has stood at 3.25 percent since last November -- is at an "appropriate" level. In addition, the ECB is still expecting inflation to ease in the coming months and average about 2 percent next year. Monday's eurozone inflation numbers came on the same day as Italy -- the group's third largest economy -- said producer prices rose in August by 0.1 percent from the previous month and by 0.2 percent from August last year. Economists said the increased cost of manufactured goods was also caused by rising oil prices. "Inflation is higher [in Italy] than in other euroland countries, posing problems of competitiveness in the long run," Fabio Scacciavillani of Goldman Sachs in London, told Reuters.
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