Inflation rising in European Union

London -- Financial analysts say the European Central Bank is walking a fine line between trying to cool inflation without hurting the economy.

Record fuel prices and high food costs kept inflation at 3.1 percent in November and December for countries that share the euro currency, the BBC reported Saturday. That was a six-year high for inflation and above the Central Bank's 2 percent target.

The Central Bank has kept interest rates at 4 percent since June amid reports it wanted to raise rates to slow inflation, the BBC reported. The Bank has held off on changes because a rise in interest rates could worsen the situation for businesses and households, said Howard Archer, Global Insight's chief European economist.

"On balance, we expect the (Central Bank) to keep up its hawkish rhetoric but to nevertheless leave its key interest rate at 4 percent," Archer said, adding the Central Bank is in an "uncomfortable position."

Copyright 2008 by United Press International.