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Last Updated: Monday, 16 July 2007, 12:44 GMT 13:44 UK
Eurozone inflation holds steady
People wine tasting
Alcohol was one of the goods driving inflation in June
Inflation across the 13 nations in the Eurozone remained unchanged at 1.9% in June, official figures show.

The Eurostat figures were in line with forecasts and remain below the European Central Bank's (ECB) 2% target.

Education, hotels, restaurants, tobacco and alcohol were the main drivers of inflation, the statistics group said.

Looking ahead, analysts said the news was unlikely to dissuade the ECB from raising rates as strong oil prices and economic growth continue to pose risks.

"The bank considers there to be continuing significant risks to the longer-term outlook for price stability," said Global Insight economist Howard Archer.

"These risks primarily stem from ongoing above-trend euro zone growth, rising capacity utilisation across the region, tightening labour markets, still excessively strong money supply and credit growth, and elevated oil prices."

Most analysts believe European interest rates will undergo at least two increases this year, taking them from the current level of 4% to 4.5%.

At a news conference following its recent rates decision, the ECB said its governing council would "closely monitor" inflation, a comment taken as a signal that rates will soon increase.

With the region enjoying a recovery in economic growth, observers say the ECB is likely to want to get interest rates back up to the level of other industrialised nations, such as the UK and the US, in order to curb excessive price rises and wage inflation


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