Euro zone inflation jumped to a record high of 4.0 percent in June, data showed on Monday, cementing expectations the European Central Bank will raise interest rates this week despite slowing economic growth.
"It's a bit of a shocker," said Gilles Moec, an economist at Bank of America who like many others had predicted a marginally lower figure of 3.9 percent for the annual inflation rate.
Euro zone interest rate futures extended falls and short-dated bond yields rose after the data.
"It's clearly going to rattle the ECB further....It certainly plays into the hands of the hawks on the ECB Governing Council," Moec said.
The 4.0 percent year-on-year figure for price growth in the 15-nation euro in June represented a leap from May's 3.7 percent, moving further from the ECB's target of just below 2 percent, European Union statistics office Eurostat said.
It was the highest inflation figure for the currency area since measurements started in 1997 and the European Commission seized on the occasion to repeat warnings against demands for big pay rises, saying that would only make matters worse.
"What is important again ...is to ensure that those inflationary expectations don't become entrenched and to avoid at all costs a wage-price spiral, which would have very damaging consequences for our economy and citizens in general," European Commission spokeswoman Amelia Torres said.
Analysts polled by Reuters had expected June inflation to rise to 3.9 percent, boosted by growing energy and food prices.