European Inflation and Labor Costs Rise (Bloomberg) (14-03-2008)

March 14 (Bloomberg) -- European consumer prices and wages rose more than expected making it even harder for the ECB to lower interest rates as indications increase regarding an economic slowdown.

The European Union's statistics office in Luxembourg said today that consumer prices in the eurozone rose by 3.3 percent in February, faster than a Feb. 29 estimate and a median forecast of 42 economists surveyed by Bloomberg News. Labor-cost growth accelerated in the fourth quarter to the highest since 2006, a separate report showed.

Economists have pushed back their forecasts for possible interest-rate cuts this year as food and energy costs soar. ECB President Jean-Claude Trichet last week quashed speculation of a rate reduction by stressing the bank's commitment to price stability even as economic growth cools.

ECB governing council member Axel Weber on March 11 said the impact on inflation of record oil prices is ``a major concern,'' adding that he doesn't see any leeway to lower borrowing costs.

The core rate of inflation, which excludes energy, food, alcohol and tobacco prices, rose to 1.8 percent last month from 1.7 percent in January.

Source: Bloomberg