Monday 25 March 2019

Eurozone inflation rate ticks up in month

Jens Weidmann. Photo: Ralph Orlowski/Bloomberg
Jens Weidmann. Photo: Ralph Orlowski/Bloomberg

Catherine Bosley

Eurozone inflation accelerated last month, buttressing the arguments of policy makers keen to phase out unprecedented stimulus.

The inflation rate rose to 1.4pc in March, the highest level since the end of last year.

The reading is in line with the median estimate in a Bloomberg survey and up from 1.1pc in February. The core rate remained unchanged.

More than three years after the European Central Bank cut interest rates below zero and started its asset-purchase programme, policy makers are finally confident that inflation will return to their goal of below but close to 2pc.

That confidence has fuelled a debate over how and when to scale back support, with officials telling investors they're are broadly right in anticipating an end of bond buying by December and the first rate rise in the middle of next year.

Most prominent among the Governing Council's 25 members arguing for bringing quantitative easing to a halt is Jens Weidmann.

The president of Germany's Bundesbank reiterated his call last month for ending asset purchases "soon" and labelled expectations for a mid-2019 hike "probably not entirely unrealistic." Dutch central bank governor Klaas Knot has adopted a similar stance, saying policy normalisation is a "top priority."

Buttressing Weidmann's stance, inflation in Germany jumped in March to the highest level since December, data last week showed. Consumer-price growth accelerated more than forecast in Italy and France, although Spain's uptick fell short of expectations.

The timing of Easter may have distorted data last month.

The ECB predicts inflation in the Eurozone will hover around 1.5pc for the remainder of the year. According to Commerzbank economist Christoph Weil, officials may be in for a rare upside surprise.

He sees the rate exceeding 2pc in the summer due to higher energy costs. (Bloomberg)

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