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Spain’s Producer Inflation Rises to Most Since 2008 on Oil

Feb. 25 (Bloomberg) -- Spain’s producer prices climbed the most in more than two years in January, adding to evidence of accelerating inflation as European Central Bank policy makers signal they may increase interest rates.

Prices of goods leaving Spain’s factories, mines and refineries rose 6.8 percent from a year earlier, the most since September 2008, compared with 5.3 percent in December, the National Statistics Institute in Madrid said today. From the previous month, prices gained 2.4 percent after increasing 0.9 percent in December.

Policy makers led by ECB President Jean-Claude Trichet are voicing concern that higher inflation may become entrenched, and ECB Governing Council member Yves Mersch said on Feb. 21 that officials may toughen their language on inflation next week. The price of crude oil rose to $98.4 today, driven higher by violence in Libya.

The Governing Council meets on March 3 in Frankfurt. So far, Trichet has said risks to the inflation outlook are “broadly balanced,” though they “could move to the upside.”

The Spanish economy emerged from an almost two-year recession in the first half of 2010, before contracting again in the third quarter as austerity measures undermined the recovery. Consumer inflation in Spain, at 3 percent in January, is one percentage point higher than in Germany, where the economy expanded a record 3.6 percent last year.

To contact the reporter on this story: Emma Ross-Thomas in Madrid at erossthomas@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net

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