Prices are on the up and up, the Euro zone annual inflation rate reached a new record high of 3.7 percent in May. The news will hit families hard as they struggle to control their own spending on several fronts amid fears that incomes won’t keep pace.

May’s 0.6 percent, month-on- month, rise produced the highest annual increase since measurements for the zone began in 1997. The hike is being driven by surging energy costs escalating world food prices and of course more expensive transport.

European Commissioner in charge of Economic and monetary affairs, Amelia Torres: “We have to remain extremely careful in order to avoid a wage and inflation spiral which would not be in the interest of anybody starting with the workers of Europe.”

As energy and petrol prices continue to fuel price rises generally, economists expect euro zone inflation to edge towards 4 percent over the coming months.

The rise seems to have cemented expectations that the European Central Bank chief, Jean- Claude Trichet will raise interest rates next month. But last week he sought to allay fears that the possible July rate rise would not contribute to an economic slow down.

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