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Euro Inflation Pressures at 7 1/2 Year High


Euro zone inflationary pressures hit a seven and a half year high in February as prices soared across the region, hinting at higher inflation to come this year, a forward-looking indicator showed on Friday.

The Eurozone Future Inflation Gauge, which aims to predict cyclical turns in inflation, rose to 110.5 in February from 109.7 in January, according to a report published by the Economic Cycle Research Institute.

Inflation pressures rose to a 17-year high in Germany in February, were close to a seven-year high in France, and cooled marginally in Italy, according to ECRI.

Official inflation hit a record high of 3.5 percent in March, way above the European Central Bank's 2.0 percent ceiling, suggesting policymakers will be reluctant to cut interest rates from their current 4.0 percent in coming months.

"While current inflation is troublesome, the real challenge for the ECB is that this forward-looking inflation gauge shows no relief in sight," said ECRI managing director Lakshman Achuthan in a statement.

A Reuters poll on Wednesday showed economists pushing back their calls for ECB rate cuts this year on account of rocketing inflation. Yet they still see the bank cutting rates twice in the second half of the year by 25 basis points each time, leaving rates at 3.5 percent at year-end.