hr: Money

The inflation rate in the European area rose to 3.7 percent, the highest since June 1992, from 3.3 percent in April, the European Union’s statistics office in Luxembourg said today. The rate for May is higher than the 3.6 percent estimate published on May 30.

Food-price inflation accelerated to 6.4 percent in May from 6 percent in April, while energy prices rose 13.7 percent from a year earlier, up from a 10.8 percent increase the previous month, the statistics office said.

The ECB, which signaled the possible interest-rate increase on June 5, is concerned about the emergence of second-round effects, when consumers and companies seek compensation for higher costs by pushing up salaries and their own prices, fanning inflation.

Investors expect the ECB to raise its key rate to 4.5 percent this year from 4 percent currently, according to Eonia forward contracts.

European labour costs rose 3.3 percent in the first quarter, more than economists forecast and higher than the 2.9 percent rate in the prior three months, according to figures published June 13.

The euro area’s core rate of inflation, which excludes volatile food and energy costs, rose to 1.7 percent in May from 1.6 percent in April, according to today’s report.

The ECB aims to keep inflation close to, but below, 2 percent.