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Eurozone headline inflation falls in March

Wednesday, 19 April, 2017 - 15:54

Eurozone headline inflation moderated in March to 1.5 percent, down from the four-year high of 2.0 percent registered in April; however, core inflation came in slightly higher than anticipated at 0.8 percent instead of the expected 0.7 percent. On a monthly basis headline inflation was 0.8 percent higher in March than in the previous month, while core inflation was 1.3 percent higher in March than in February. The figures, which were released by the European Union’s statistics office on Wednesday, are unlikely to change the European Central Bank’s position on interest rates as the figures are below the bank’s target inflation rate of close to two percent over the medium term.

The breakdown of the rates for the 28 member states of the bloc, including those that don’t use the Euro, shows that the lowest annual inflation rates were registered in Romania (0.4%), Ireland and the Netherlands (both 0.6%), while the highest rates were recorded in Lithuania (3.2%) Estonia (3.0%) and Latvia (3.3%).

The lower overall inflation rate in March was the result of decreased rate of growth in the cost of energy from 9.3 percent last month to 7.4 in March, and in the cost of food, alcohol and tobacco which fell from 2.5 percent in February to 1.8 percent in March. The rate of inflation in the services sector, the EU’s largest, was 1.0 percent in March, down from 1.3 percent in February.

At a meeting of the ECB last month the governing council decided to keep interest rates unchanged, but it announced that from April the bond buying scheme it put in place to increase liquidity and raise inflation would be reduced from its previous level of €80 billion to €60 billion per month, reflecting the slightly improved economic forecast.

“Sentiment indicators suggest that the cyclical recovery may be gaining momentum… However, underlying inflation pressures continue to remain subdued,” ECB President Mario Draghi said at a press conference at the time.


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