Eurozone inflation exceeds European Central Bank target

Eurozone inflation increased above the European Central Bank's target for the first time in four years, Eurostat's figures showed on Thursday.

Inflation in the 19-nation bloc touched 2% in February, details Eurostat, up from a rate of 1.8% the month before and the highest since January 2013 and is slightly above the ECB's target of just below 2%.

On the other hand, the February inflation hike was first and foremost attributable to a 7.2-percent increase in energy costs. The core measure of inflation-which strips out items such as energy and food-was unchanged at 0.9%, while prices of manufactured goods rose at a slower pace than in January.

Rising energy prices and higher food costs were the main drivers behind the overall increase in Germany, a breakdown of the non-harmonized data showed.

The highest print of German inflation in four-and-a-half years on Wednesday has already triggered fresh calls from the bloc's biggest economy for the European Central Bank, which targets inflation of below but close to 2 percent, to end loose monetary policy.




"The continued impact of transitory factors on the headline rate, coupled with the continued limited pass through to core inflation, should see the ECB leave both policies unchanged at its meeting next week and also resist calls to adjust its forward guidance for the time being", said Cathal Kennedy, European economist at RBC Europe. The latest inflation was the strongest since March 2012, when prices had grown 3.6 percent.

In January, Mr Draghi pointed to a new set of criteria arguing that the return to the ECB's inflation goal must be durable, self-sustained and representative of the euro area as whole.

The ECB is scheduled to run its quantitative easing bond-buying scheme until at least December and has pushed interest rates deep into negative territory to try to stimulate weak growth and hitherto stubbornly low inflation.

Most analysts think the bank will not back off its stimulus but may signal at some point this year its intentions to start tapering it off gradually in 2018.

It marks a significant jump from the inflation position as recently as November past year, when the rate was at 0.6% across the 19-nation bloc. He has also said that the economy still needs support through a year of heightened political uncertainties that will include elections in the Netherlands, France, and Germany.

(Copyright © 2015. All Rights Reserved.)
 
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