Eurozone inflation spikes to record four percent

The rate, up from 3.7 percent in May, was the highest since the launch of the euro back in 1999 and slightly exceeded analysts' forecasts for 3.9 percent, as polled by Dow Jones Newswires.

Red-hot oil prices, which saw a barrel of crude rise to over $142 last week, have been driving overall inflation to new records, pinching the purchasing power of consumers also struggling with high food prices.

Record inflation, which has triggered protests by fishermen and truckers recently, adds to consumer and businesses' pain just as they are struggling to cope with flagging economic activity.

The surge to 4 percent in June brought euro zone inflation even further away from the European Central Bank's (ECB) comfort zone, which it defines as annual consumer price growth of close to but less than 2 percent.

Despite slowing economic growth, the ECB has indicated that it will raise interest rates by a quarter of a percentage point on Thursday in an attempt to cool inflation.

"The further marked rise in euro zone consumer price inflation to a record high of 4 percent in June surely rubber stamps an ECB interest rate hike from 4 percent to 4.25 percent," said economist Howard Archer at consultants Global Insight.

"Indeed, the extent of the jump to 4 percent from 3.7 percent in May is likely to fuel expectations that interest rates will rise higher still, especially as the inflation rate is now more than double the ECB's target of 'close to, but just below 2 percent," he added.

Although ECB president Jean-Claude Trichet has indicated that the central bank currently has only one rate hike up its sleeve, further inflation increases raise the chances that more will follow, said Commerzbank Christoph Weil.

"Concerns ... are likely to increase during the months ahead, as the steady advance in oil prices will probably push inflation up to 4.25 percent in summer," he said.

"As a result, the market will no doubt be speculating increasingly about ECB rate hikes," he added.

However, other analysts said that increasingly feeble growth would eventually cool inflationary pressures, although that might not be until well after the European summer.

"Oil prices have failed to stabilize recently, so it's likely that headline inflation will move even higher during the summer months," Unicredit economist Aurelio Maccario said.

"A moderate deceleration trend won't begin before November. There's plenty to keep the ECB alert, but we remain convinced that tightening beyond July is unnecessary because gross domestic product is slowing sharply," he added.