We have been use, in the past decade, to a low inflation. That's history... Everyday we are breaking record level in almost all prices, just name it : Oil, Gas, Electricity, Wheat, Services etc.. etc... The purchasing power is being eroded and with it the mandate that the ECB had promised to its 400 millions citizens.
"Record oil prices and continuing high food costs kept eurozone inflation at 3.1% in December, the European Central Bank (ECB) has said."
"Finnish consumer prices rose by 2.9 per cent year-on-year in November, compared with an October inflation rate of 2.7 per cent, Statistics Finland (SF) said in a statement."
"Spanish inflation accelerated in December well ahead of expectations, preliminary data from the National Statistics Institute . The European Union-harmonized index of consumer prices rose 4.3 percent on the year in December, compared with a 4.1 percent annual increase in November."
"Consumer confidence in France unexpectedly dropped to a 19-month low in December after inflation accelerated on rising energy costs. French consumer prices rose at an annual rate of 2.6 percent in November, up from 2.1 percent in October"
"Swiss inflation unexpectedly accelerated to the fastest pace in more than 12 years in December, led by higher energy costs. Consumer prices increased 2 percent from a year earlier after rising 1.8 percent in November, the Federal Statistics Office in Neuchatel said today. That's the highest rate since October 1995."
"Germany got the second top ranking despite a 2.2 percent inflation rate, its highest in 13 years (since 1995), according to the German Federal Statistics Office. The higher inflation rate is due to price increases on energy, fuel and food products."
So cutting European interest rates is out of the question for the moment. However if the European economy start to fall into a recession mid 2008 then inflation might not be any more an issue and rate cut will follow...
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