Euro zone inflation jumped to a record high of 4.0 percent in June, cementing expectations the European Central Bank will raise interest rates this week despite slowing economic growth.

Inflation risks have increased in the medium term and the European Central Bank stands ready to counter inflationary pressures, ECB President Jean-Claude Trichet told the EU Parliament on Wednesday.

Germany may report a shrinking in its economy for the second quarter of this year and stagnation would probably be a positive outcome, Deputy Economy Minister Walther Otremba said on Tuesday.

In the view of a central banker, the worst thing about skyrocketing food and energy prices is not their rise, but that most people think higher prices are here to stay, the New York Times reported.

Euro zone services and manufacturing activity both fell unexpectedly into contraction in June, a key survey showed on Monday, although the weakness may not be pronounced enough to deter an ECB rate hike in July.

An online petition urging the European Central Bank not to raise interest rates in July is gaining ground, with people from France, Spain, Italy but also from English-speaking countries adding their signatures.

Lehman Brothers downgraded continental European stocks to "underweight" from "overweight," while raising U.S. equities to "overweight" from "underweight."

A cut, given inflation rates, would simply make it more likely that we would enter recession at some point. If prices keep rising significantly, then the fiscal and monetary response will have to be more drastic somewhere down the road.

The European Central Bank's inability to raise rates may mean the time for a jump back into the dollar has arrived, as the  full effects of the credit crunch still have to be felt in Europe, analysts told CNBC.com.

The European Central Bank's hawks must be aching to hike rates, but they will likely sit on their hands again and leave rates at 4 percent despite inflation rising to 3.6 percent in May.

The European Central Bank's 10th anniversary may have been marred by high inflation, but the euro's show of strength over the past nine months has been impressive.

Sky-high fuel and food prices crashed the party when finance ministers flocked to Frankfurt to celebrate the inflation-fighting European Central Bank's 10th birthday on Monday, a milestone in Europe's monetary union.

European stocks are set to stay range-bound this week as the subprime crisis continues to take its toll on confidence and rising inflation means investors do not expect the European Central Bank to cut rates any time soon.

Global food prices could rise further in the short term and keep rising over the longer term as supplies are unlikely to match increased demand, a European Central Bank note said.

On the verge of the European Central Bank's 10^th anniversary, the news on inflation doesn't look good. Against the bank's target of "below but close to" 2 percent, euro-zone prices rose 3.6 percent in May, compared with the year ago, back to a historic high, data showed on Friday.