Eurozone inflation hits surprise 29-month high

A record monthly increase in eurozone inflation unexpectedly sent the annual rate to a 29-month high in March, strengthening expectations that the European Central Bank will tighten monetary policy further this year.

Official data showed the consumer price index (CPI) throughout the eurozone rose to 2.7% from 2.4% in February, the European Union's Eurostat agency said

It is the highest level since October 2008 when the rate was 3.2%.

Economists were expecting no change from the March estimate of 2.6%.

On a monthly basis, a seasonal increase in prices for clothing and footwear, and higher costs for transport fuel and heating oil, led to a 1.4% jump in the consumer-price index, after a 0.4% rise in February.

It was the sharpest monthly increase since records began in 1996, Eurostat said, and also topped economists' predictions of a 1.3% rise from a month earlier.

In a sign underlying price pressures are building, Eurostat said core inflation, which excludes volatile items like energy, food, alcohol and tobacco, rose by 0.3% to 1.3% from a year earlier in March, the highest level since August 2009.

Core inflation also rose by a record 1.4% on a monthly basis, Eurostat said.

Earlier this month, the European Central Bank (ECB) hiked interest rates from 1% to 1.25% - the first time it has raised rates in nearly three years - as surging oil prices across the region and record growth in Germany stoked inflation concerns.

Today's record inflation figures suggest further rate rises are likely to follow.