Inflation in the euro area experienced a setback in March larger than expected, and rose to 6.9% year-on-yearthanks to a sharp drop in energy prices, the European statistics agency Eurostat announced on Friday.
In Februarythat indicator had frustrated expectations by registering 8.5%, after reaching a worrying peak of 10.6% last October. For Marchmost market analysts estimated inflation at 7.1%.
However, Eurostat data shows that pressures continue in the food segmentwhich includes tobacco and alcoholic beverages.
According to the agency, in In March, the food segment registered an increase of 15.4%, compared to 15.0% in February. The same happened with the segment of servicesthat advanced 5.0% in March after 4.8% in February.
However, energy priceswhich had fueled the strong inflation of recent monthsfell by 0.9% in March. In February, on the other hand, they had risen 13.7%, according to Eurostat.
This setback seems to be related to the containment measures adopted in the bloc countriesbut also to gradual overcoming of the boreal winter and its low temperatures.
However, core inflation experienced a slight increase, going from 5.6% in February to 5.7%.
The team of experts from the Oxford Economics consultancy pointed out that both 5.7% of the inflation core and 15.4% of the food segment are a record for those specific lines.
Of the main economies of the block, all experienced significant setback: Germany went from 9.3% in February to 7.8% in March; France fell from 7.3% in February to 6.6% in March, and Italy went from 9.8% to 8.2%. In SpainIn turn, the reduction in year-on-year inflation was drastic, going from 6.0% in February to 3.1% in March.
Even in the countries balticswhich came from almost a year of inflation close to or higher than 20%, experienced setbacks in the price readjustment: Lithuania record 15.2%, Estonian 15.6%, and Latvia 17.3%.
In parallel, it was known that the rate of unemployment of the 19 countries that adhere to the euro remained in the 6.6% in February compared to January. This meant a lower level than expected, since analysts projected that it would be located at 6.7%.
What will the ECB do?
This data feeds the expectation of less updating of the interest rates from the European Central Bank, This expectation was already high after the financial crisis broke out, which caused the fall of some banks, mainly in the United States, but which generated the destabilization of the sector in Europe.
However, from Oxford Economics they pointed out that the cooling of the general index will not be enough to drive a change in the monetary policy of the European Central Bank (ECB), bys underlying inflation pressures.
In that sense, expect a new rise in the ECB’s reference interest rates, “until weaker demand, coupled with easing energy prices, ease underlying price pressures.”
For his part, Bert Colijn, of the ING bank, highlighted that “although March has seen a large drop in inflation, core inflation remains a concern for the ECB”.
In his view, the “potential for inflation underlying remains more rigid than expected will be the main reason why the ECB will continue raising its rates in the short term.
For Colijn, this 5.7% increase in core inflation “is a sign that the fight against inflation is not over.”
Source: Ambito
