WORLD> Europe
Policy-makers call inflation top threat
(Agencies)
Updated: 2008-06-17 08:37

BRUSSELS/JEJU, South Korea - Policy-makers around the globe declared soaring inflation a top threat on Monday, with pressure rising for central banks to raise interest rates amid protests against higher costs of living.


South Korean President Lee Myung-bak (top) speaks during the 2008 ASEM Finance Ministers' Meeting in Seogwipo on Jeju Island June 16, 2008. [Agencies]


The European Commission, the European Union's executive arm, said inflation was its main economic concern after data showed prices in the 15 countries using the euro rose a record 3.7 percent year-on-year in May from 3.3 percent in April.

The comments boosted the euro against the dollar because they fueled speculation the European Central Bank may raise interest rates at its July 3 meeting by more than the 25 basis point hike already expected, traders said.

Inflation in the euro zone, as elsewhere, is fueled by food and energy costs.

EU finance ministers believe the weakness of the US dollar and speculation also play a role.

Talking to European and Asian finance ministers meeting on the South Korean resort island of Jeju, South Korean President Lee Myung-bak said the inflation surge was the biggest challenge the economy had faced in some 30 years.

"It's no overstatement to say that the world is faced with the gravest crisis since the oil shock of the 1970s, with oil, food and raw materials prices skyrocketing," he said.

Finance ministers from the United States, Canada, Japan, France, Germany, Italy, Britain and Russia, meeting in Japan over the weekend, warned that soaring commodities prices could damage economic growth.

But they did not come up with any plans to calm financial markets or quell public protests over the rising cost of living.

PROTESTS

Protests by truckers, fishermen and other groups particularly vulnerable to rising energy costs have swept across countries from Spain to India and South Korea in recent weeks.

On Monday, French truckers began blocking roads in the latest protest to pressure the government to help them cope with oil prices that have more than doubled in a year.

Colombian truck drivers staged strikes on Monday to protest high fuel costs and road tolls and demanded higher transport payments after failing to reach a deal with the government.

US crude oil prices ended slightly lower, down 25 cents at $134.61 a barrel, as investors reassessed the impact of a potential increase in production from the world's top producer, Saudi Arabia. Oil prices are still double from a year ago.

Crude prices fell after earlier hitting a record high just under $140 a barrel due to the weaker US dollar and supply disruption concerns in the North Sea.

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