* Euro zone inflation at 2.7 percent in March
* Energy prices drive up cost of living, rising 8.5 percent
* ECB concerned about short-term inflation risks
By Robin Emmott
BRUSSELS, April 17 (Reuters) - The EU’s statistics agency revised upwards its March inflation reading for the euro zone on Tuesday, adding to the case for the European Central Bank to hold back from further monetary stimulus.
Costlier oil pushed consumer prices higher.
Prices in the 17 nations sharing the euro were up 2.7 percent in March from a year ago, Eurostat said on Tuesday, the same level as in February but up from a first estimate for March of 2.6 percent.
Brent crude prices are near $120 a barrel, hitting prices at a time when a depressed economy with rising unemployment, government cuts and weak business confidence has eaten into consumers’ ability to spend.
That and the return to debt crisis mode in Spain and Italy have prompted speculation that the ECB could do more to stimulate growth. But high headline inflation numbers to some extent tie the bank’s hands.
“Higher energy prices and increases in indirect taxes may keep inflation above the ECB’s target in the remainder of this year,” said Martin van Vliet, an economist at ING, referring to planned increases in value-added taxes in Italy and France.
Energy accounted for about 0.6 percentage points of the euro zone’s inflation in March. Without that rise, consumer prices would be around the European Central Bank’s target of below, but close to 2 percent.
Concerns about supply disruptions from U.S. and European sanctions on OPEC’s second-largest producer Iran have driven Brent crude up by about 13 percent this year.
Underlining the impact of oil prices, inflation in non-euro zone Britain also rose in March from February.
“There is quite a big hurdle for the ECB to cut interest rates further to help revive euro zone growth,” van Vliet said.
The ECB left interest rates on hold at 1.0 percent for the fourth month running in early April, resisting calls from European politicians and leading international economists to cut rates further, and let inflation rise, to promote growth.
After calming the euro zone debt crisis with unprecedented low-interest, three-year loans to commercial banks, the Frankfurt-based bank appears to be back in inflation-fighting mode, warning in its latest bulletin that risks of rising prices were high.
“Inflation is likely to stay above 2 percent in 2012, mainly owing to recent increases in energy prices,” the editorial in the ECB’s April monthly bulletin said.
Annual inflation in March was as high as 3.8 percent in Italy and 3.1 percent in Belgium, w here wage links to inflation help to further push up prices, w h ile only 2.3 percent in Germany and 1.8 percent in recessionary Spain.
While euro zone inflation is below last year’s peak of 3 percent, economists and the ECB had expected prices to fall steadily as the economy has stumbled from the impact of the bloc’s sovereign debt crisis.
Most economists believe the euro zone’s economy has slipped into recession after a contraction in the last quarter of 2011 and probable shrinkage in the first three months of this year.
French President Nicolas Sarkozy, who is seeking re-election in Sunday’s first-round vote, added his voice to calls for a shift in monetary policy, telling local radio on Tuesday it was “not possible that the ECB does not participate in supporting growth”.
The conservative French leader has upset Berlin by declaring at a campaign rally that he wanted a debate on the ECB’s role in helping economic growth, breaching a November agreement not to publicly discuss the bank’s independence.