Market stall in Madrid, Spain. Analysts analyze the latest eurozone inflation data.
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Inflation in the euro area fell sharply in March as energy prices continued to fall and basic spending hit a record high.
Based on preliminary Eurostat data released on Friday, headline inflation in the 20-person bloc amounted to six.9% in March. For comparison, in Februaryheadline inflation was 8.5%.
The most important reason for this decrease of 1.6 percentage points was the decrease in energy costs.
Nevertheless, there are other parts of the inflation basket that remain stubbornly high. Food prices contributed the most to the overall inflation reading for March.
Core inflation – which excludes volatile energy, food, alcohol and tobacco prices – rose barely from the previous month. It hit an all-time high of 5.7 percent. in March from 5.6% in February.
Rates of interest in sight
These numbers don’t provide strong enough evidence that The European Central Bank may consider pausing the cycle of rate of interest hikes that began in July.
“ECB policymakers is not going to be reading much from the fall in headline inflation in March and shall be more concerned that the core rate has hit a recent record,” said Jack Allen-Reynolds, deputy chief eurozone economist at Capital Economics. in a note on Friday.
He added that the ECB will probably proceed to lift rates despite the drop in the most important index.
ECB member Isabel Schnabel made that headline on Thursday inflation has began to say no, but core inflation is proving sticky.
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While last yr’s energy price hikes spread rapidly across the economy, they take longer to dissipate, “and it is not even clear if it can be completely symmetric in the sense that every part will go down in any respect,” she said at an event on Thursday, in accordance with Reuters. .
The ECB raised rates of interest by 50 basis points in March, lowering its most important reference rate to three%. Nevertheless, this didn’t indicate potential rate of interest decisions in the coming months.
The recent banking turmoil has raised questions on whether central banks have been too aggressive in shifting rates of interest to fight inflation. The ECB’s chief economist, Philip Lane, said further rate of interest hikes can be needed to cope with high inflation if the banking instability dissipates.