Eurozone inflation stayed under the European Central Bank’s (ECB) target for a second month in running in February, a preliminary estimate released by Eurostate showed Tuesday. The Euro Fx Futures (6E), which witnessed modest losses, ahead of the data, thanks to the dollar’s rally, fell sharply after the data.
The annual inflation in the eurozone, the union of 21 member states sharing euro as the common currency, however, picked up pace to 1.9% in February, from 1.7% in January. Economists had braced for the inflation to hold steady at the January level.
The core annual inflation, which strips off energy, food, alcohol and tobacco, is expected to accelerate to 2.4% from 2.2%, with economists once again expecting a steady reading.
Source: Eurostat
Services inflation quickened to 3.4% from 3.2%, and the decline in energy prices slowed to 3.4% from 4%.
Economist Warns of Upside Risk: Investment bank ING pointed out that the rise in both goods and services inflation, even before the Middle East conflict began, showed that inflationary pressures had far from fully abated. The economists said, “Clearly, the energy supply impact of the Middle East war brings upside risk to the inflation outlook, which puts the ECB on high alert.”
“If the conflict continues for a few weeks, expect inflation to rebound to the mid-2% range,” the firm said. “But if a significant disturbance to energy supply lasts longer, the impact is bound to become larger, which means that uncertainty around the inflation outlook is returning after having been comfortably steady around the target for a long time.”
The next Governing Council meeting to discuss rates has been scheduled for March 18-19.
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