UPDATE 2-Euro zone PPI jumps, lowers chance of any rate cut

(Adds OECD forecast, background)

By Jan Strupczewski

BRUSSELS, Sept 2 (Reuters) - Euro zone producer prices jumped in July as oil prices hit a record high, an increase which is likely to worry the European Central Bank and reduce the chances of any near-term easing of interest rates.

The EU's statistics office said on Tuesday prices at factory gates in the 15 countries using the euro rose 1.1 percent month-on-month and 9.0 percent year-on-year -- an acceleration from the 8.0 percent annual growth in June and 7.1 percent in May.

Economists polled by Reuters had expected a 1.3 percent monthly rise and a 9.1 percent year-on-year increase.

But economists said that more importantly for the ECB, core producer prices, which exclude energy and construction, rose 0.5 percent month-on-month and 4.3 percent year-on-year.

"This will reinforce the ECB's concerns that inflationary pressures currently remain potent down the supply chain, and increased second round effects from persistently elevated energy and food prices are still a risk," said Howard Archer, economist at Global Insight.

Producer prices are an early indication of inflationary pressure because their increases, unless absorbed by retailers via lower profit margins, eventually translate into higher costs for consumers.

The ECB aims to keep consumer price inflation below, but close to 2 percent, but it was 3.8 percent in August, down from 4.0 percent in July.

"While lower energy and commodity prices should increasingly feed through to bring inflation down, the significant rise in core producer prices in July reinforces belief that the ECB will not be cutting interest rates anytime soon, despite the growing risk that the euro zone is headed for recession," Archer said.

The Organisation for Economic Cooperation and Development revised down on Tuesday its forecast for euro zone economic growth to 1.3 percent from 1.7 percent for the whole 2008.

It forecast the euro zone could narrowly escape a technical recession of two consecutive quarters of negative growth by expanding slightly in the third quarter after a second quarter contraction, but noted the forecast had a large margin of error.

The slower growth and falling crude oil prices CLc1, which hit a record $147.27 a barrel on July 11 but have since fallen, touching $107.17 a barrel on Tuesday, should hel ease inflationary pressures for consumers.

This, in turn, would diminish the chances of inflation triggering higher wage demands and starting a wage-price spiral -- something the ECB wants to avoid. The bank raised interest rates in July by 25 basis points to 4.25 percent to anchor inflation expectations better.

It has since left its options open. But many economists expect the ECB's next move will be a rate cut, albeit only in 2009.

"In terms of inflation, we still expect a lower trend from now ... but the increase in core inflation will be a warning sign to the ECB," said Luigi Speranza, head of inflation economics at BNP Paribas.

The rise in producer prices was driven mainly by energy costs, which were up 2.8 percent on the month to stand 24.5 percent higher than a year earlier.

(Additional reporting by Huw Jones and Bill Schomberg)

(Reporting by Jan Strupczewski, editing by Mark John/David Stamp/Victoria Main)