FRANKFURT, April 21: The European Central Bank is concerned about sharp food price increases which it said on Monday were hard to predict but would likely keep pushing higher.

“The outlook for both world and domestic food prices remains highly uncertain,” the ECB said in its annual report for 2007.

Spikes in the cost of food, along with energy, were major contributors to record eurozone inflation of 3.6 percent in March.

“Although the supply of agricultural products should eventually respond to the increase in demand, the catch-up period may be more prolonged than currently envisaged,” the report said.

“Overall, risks seem to be on the upside.”

The bank said international food prices had been pushed up by changing consumption patterns and by new sources of demand, in particular the use of agricultural products to produce biofuels.

“As these latter developments are of a structural nature, they are likely to continue to exert upward pressure on global food prices in the future,” the bank warned.

Economists nonetheless believe that inflation itself will ease as the economy slows and technical factors such as the easing in year-earlier comparisons come into play.

At the same time, the ECB is worried that price spikes in 2007, which continued into January, the last month for which it provided data in the report, will drive demand for higher wages and put pressure on other consumer prices.—AFP