More shocking inflation numbers from the eurozone

Sooner or later, central banks will have to raise rates. The latest inflation shock comes from the eurozone area - 4 percent and rising.

Yearly inflation in euro nations hit a record 4 percent in June, the EU statistics agency Eurostat said Monday, adding pressure on the European Central Bank to raise borrowing costs even as the economy slows.

ECB officials have signaled they may hike their key interest rate on Thursday from 4 percent to 4.25 percent to try to cool prices — although that would raise costs for home buyers and companies seeking credit, further slowing the economy.

It may also weaken the dollar by encouraging investors to seek higher returns by
placing funds in higher-interest euro currency accounts. That could send oil
prices, which hit a record above $143 per barrel Monday, higher as well.

ECB President Jean-Claude Trichet has insisted that keeping prices
stable is his main task and the bank doesn't face a trade-off against economic
growth or job creation. That way of thinking does not fit this current wave of
inflation, he said last month.

Instead of indicating an overheating economy, inflation — now running at the highest level in 16 years — seems to be acting as a brake on Europe's economy as shoppers steer clear of major purchases.