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EU Expecting Full Point Jump In Inflation

Record prices for food, oil and metals risk driving cost increases beyond last year's inflation of 2.1 percent, and now threaten to increase production costs for other goods as well.

BRUSSELS, Belgium (AP) -- The European Union expects inflation to rise by more than a full point this year to 3.2 percent, pushed higher by soaring energy and food prices.
 
Record-high prices for food, oil and metals risk driving cost increases beyond last year's inflation of 2.1 percent, and now threaten to increase production costs for other goods as well, the EU warned Monday.
 
The EU also cut its growth forecast for the 15-nation currency zone to 1.7 percent this year -- from 2.6 percent last year -- saying the current outlook was ''unusually uncertain,'' but insisted that Europe was far from recession.
 
Huge price hikes have been caused by a weaker U.S. dollar and financial turmoil that saw investors stash money in commodities such as oil, which hit another record high Monday of $119.93 per barrel.
 
Inflation will calm by the end of the year, the EU said, but it will stay well above the European Central Bank's guideline rate of 2 percent -- adding pressure on the bank to steer clear of rate cuts even as the economy slows.
 
The EU warned that global trade is slowing markedly and major exporters face significant difficulty.
 
''The expression 'unusually uncertain' describes the current economic situation and outlook particularly well,'' it said in a report. ''The global economy is cooling and, in particular, the U.S. economy is on the brink of a recession.''
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