Stagflation grips Eurozone as interest rates look set to rise

Eurozone inflation surged to an all-time high of 4pc in June despite worrying signs of a slump in manufacturing, confronting the European Central Bank with the toughest challenge since its creation a decade ago.

Soaring oil and food prices guarantee a quarter-point rise in interest rates to 4.25pc on Thursday, further widening the gulf in rates between Europe and America.