Jean-Claude Trichet has vowed to keep a close eye on inflation

Annual inflation for the 12 eurozone nations rose from 2.4% in April to 2.5% in May, said the EU's Eurostat agency.

The ECB has set an inflation comfort zone of 2%, and raised its benchmark interest rate to 2.75% earlier this month to tackle rising consumer prices.

However, core inflation, which excludes food and energy prices, fell to 1.5%.

This will reassure the central bank that high oil prices are not yet filtering through to push up other prices and wages significantly.

"It's good news as core inflation has dropped ... which I consider to be pretty encouraging ... It gives a pretty good chance that headline inflation will decline later this year," said Holger Schmeiding, eurozone economist at Bank of America.

Most economists expect the ECB to raise interest rates by a further quarter percentage point to 3% at its rate-setting meeting in late August.

Employment rises

Eurostat also released new employment figures on Tuesday, which said that employment in the 12 eurozone nations grew by 0.3% or 427,000 in the first quarter of 2006, compared with the previous three months.

It said the growth was driven by job creation in Spain, Finland and Italy, while employment fell in Germany.

Eurostat estimated that there were 138 million people employed in the eurozone in the first quarter of 2006, and 203 million in the wider European Union of 25 member states.