STATEC reported inflation was 3.1% last month, largely driven by a 1.3% increase in the cost of petroleum products. The bureau also saw higher prices in February for housing and utilities (5%), transport (3.6%), and food and beverages (2.3%).

Last week pan-European statistics agency Eurostat said Luxembourg had the fifth highest rate in the euro area in January, 3.2%. STATEC previously announced that inflation was over three percent in December and for 2011 overall.

Indexation is triggered when the overall cost of living rises by 2.5%. Under Luxembourg’s current regulations, salaries and retirement cheques will go up--according to a sliding scale--after a six month delay. That means employers and social insurance funds will need to increase payments starting on October 1 this year.

Etienne Schneider--the newly appointed economy minister--and Yves Mersch, the long serving president of the central bank--are among those that have said the system of automatic indexation needs to be reformed in order for Luxembourg to remain economically competitive.