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French inflation: 3-yr high
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July 12, 2000: 10:57 a.m. ET
Economists see ECB on interest-rate trigger as oil prices lift euroland prices
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LONDON (CNNfn) - Rising oil prices drove France's annual inflation to 1.7 percent in June, the highest level since January 1997, official data showed Wednesday, prompting some economists to predict the European Central Bank would soon raise interest rates to cool the economy of the 11-nation euro-currency zone.
The consumer price index rose 0.2 percent in June, a bigger jump than the 0.1 percent increase economists expected, according to a survey by Reuters. That pushed the annual inflation rate up from May's level of 1.5 percent, French statistics office INSEE reported.
Based on the seasonally adjusted "core" inflation index, which strips out tax changes and more volatile prices, inflation rose to 1.2 percent in June from 1.1 percent in May.
Economists said the data reinforced their belief that the European Central Bank was likely to raise interest rates again in the coming months. The ECB aims to keep euro-zone inflation under 2 percent.
"This is the highest inflation rate we've seen in over three years and much higher than 0.3 percent in June 1999," said Exane economist Emmanuel Ferry. "Euro-zone inflation should come in around 2.2 percent in June, and the ECB is likely to respond with a 25-basis-point rate rise in September."
INSEE said the annual rise in prices in France stood at 1.9 percent on the European Union's harmonized basis, alongside a German figure of 2.0 percent. 
Half of the increase in French price in June was attributed to a 1.8 percent rise in energy prices. Less severe increases in prices for manufactured goods and services also contributed to inflation.
The ECB's key refinancing rate is currently at 4.25 percent, after the central bank raised the rate in steady stages from 3.0 percent in November. Crude oil prices of nearly $30 a barrel in June lifted the price of oil products in France by 2.7 percent from the previous month and by 25.3 percent from a year earlier.
In addition to the higher oil prices, French firms took advantage of a growing economy to lift prices and profit margins, said Crédit Lyonnais economist Olivier Eluere.
"France is in the midst of an economic rebound," said Eluere. "Companies, especially those in the service and retail sectors, have seized on the rise in demand to hike up prices."
Noting that the weakness of the euro had accentuated that rise, economists said they judged as too modest the government's inflation estimate of 1.1 percent in 2001. The government raised that estimate on Tuesday from its previous forecast of 0.9 percent. 
-- from staff and wire reports
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