BUSINESS
09/30/2011 05:26 EDT | Updated 11/30/2011 05:12 EST

Eurozone inflation jumps to 3 per cent in September, highest since October 2008

FRANKFURT - Inflation jumped to a startling 3.0 per cent in September in the 17 countries that use the euro, its highest level since October 2008.

The number reported Friday by the European Union's statistics agency is a big increase from 2.5 per cent in August and the scale of the increase was unexpected.

Ahead of the release, some economists had said a technical change in the way statistics are kept for seasonal goods could have an unexpectedly big impact on the headline inflation rate. Some economists expected little or no change while others had predicted a figure as high as 2.9 per cent.

Still, the eye-catching increase could complicate upcoming interest rate decisions by the European Central Bank. The bank has been under pressure to cut rates soon as economic growth in the eurozone has stalled.

The number follows a higher than expected 2.6 per cent figure for the eurozone's largest member, Germany. That report cited higher oil prices and increases in the prices of clothing and shoes as merchants put out new fall and winter offerings.

The European Central Bank meets Thursday in Berlin for its next rate-setting meeting. Many economists think the bank could signal it is ready to cut its key rate from 1.5 per cent in the coming weeks and months because of fears that the eurozone debt crisis will push the continent back into a recession.

Recession fears argue for cutting rates, since that stimulates growth by lowering borrowing costs for businesses.

The bank is unlikely to cut rates, however, unless it thinks there is no danger of higher inflation.

Other recent inflation indicators, such as the EU survey of sales prices expectations, have been pointing down, and the recent slackening growth also bears down on price pressures.