Zurich - Inflation in the eurozone slowed more than forecast this month, its first deceleration in nearly a year as energy price-effects petered out.
Consumer prices increased 1.5% in March, the European Union’s statistics office in Luxembourg said on Friday. That’s down from the previous month’s reading of 2% and falls short of the 1.8% rise forecast in a Bloomberg survey of economists. The core measure also fell more than economists forecast.
The slowdown - partly reflecting the timing of the Easter holiday - was predicted by the European Central Bank (ECB). The pickup in the rate in the past year has been chiefly due to volatile items such as energy and food, and underlying price pressures are still considered weak, which officials have said speaks for keeping policy extraordinarily expansive.
“It will officially strengthen the ECB’s position of looking through the current rise and focusing on the core rate, where there’s not much movement,” Raiffeisen Schweiz economist Alexander Koch said prior to the release of the figures. “So long as there’s no sign of a sustained upwards trend in core inflation, they’ll stick to they’re expansive stance.”
The core inflation rate, which excludes items like oil and foodstuffs, fell to 0.7% in March, after 0.9% the month before, the data showed. Economists had expected a reading of 0.8%. Consumer price growth in Germany and Spain also weakened more than expected in March.
The better inflation picture - compared with sub-zero monthly prints in early 2016 - coincides with data showing a pick up in momentum within the 19-country bloc, even in the face of potential political risks due to Brexit or elections in France.
Business sentiment in Germany, the region’s largest economy, climbed to the strongest since 2011 in March, and a key gauge of manufacturing and service-sector activity for the region signaled a pickup in the pace of growth.
The euro area’s accelerating economy has in turn stoked a debate about unwinding the extraordinary stimulus. While ECB rate setters have their next policy meeting on April 27, a policy change isn’t expected until at least June, when they will have new forecasts.
“We need to look through the recent surge in inflation, which is driven by transient factors that will probably fade before long,” Executive Board member Peter Praet said in Madrid on Monday. “A very substantial degree of monetary accommodation is still needed for underlying inflation pressures to build up and support headline inflation.”
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