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Financial News: Eurozone Inflation Eases To Prove ECB Right

Eurozone Inflation Eases To Prove ECB Right

03/31/2017 - 07:51:00 (RTTNews)

(RTTNews) - Reflecting the timing of the Easter holiday, Eurozone inflation eased more-than-expected to a three-month low in March to return within the target range of the European Central Bank and added credence to the bank's cautious policy stance.

Headline inflation slowed to 1.5 percent in March from 2 percent in February, flash data from Eurostat showed Friday. Economists had forecast the annual rate to ease to 1.8 percent.

Inflation exceeded the ECB's target of 'below, but close to 2 percent' in February, when at 2 percent it reached the highest level since January 2013.

ECB policymaker Benoit Coeure said on Friday that the bank's forward guidance remains valid as core inflation remains subdued and the inflation outlook remains highly conditional on the monetary policy stance. He also said that the risks to growth have shifted towards the neutral territory based on the incoming data.

"This clearly suggests that current expectations on the intended horizon of our purchases..., and on the sequencing of policy instruments, remain valid today," Coeure said at an event in Brussels.

IHS Markit Chief European Economist Howard Archer said March's marked dip in Eurozone consumer price inflation fuels belief that February will have seen the peak level and it will not be re-visited for some considerable time to come.

However, there may well be a move back up in inflation in April due to Easter price rises, Archer added.

The big picture is that inflation is now on a downward trend, Jack Allen, a European economist at Capital Economics, said. The economist expects the ECB to continue purchasing assets and leave interest rates unchanged until well into 2018.

Core inflation that excludes energy, food, alcohol and tobacco slowed to 0.7 percent from 0.9 percent in February. The rate was slightly slower than the expected 0.8 percent.

Food, alcohol and tobacco prices grew at a slower pace of 1.8 percent and energy prices by 7.3 percent.

Services cost also rose at a weaker pace of 1 percent. Meanwhile, the increase in non-energy industrial goods prices held steady at 0.2 percent.

Among the big-four nations, three reported a slowdown in inflation during March. Inflation in Germany slowed notably to 1.5 percent from 2.2 percent in February and that in Spain to 2.1 percent from 3 percent.

Italy's inflation fell to 1.3 percent from 1.6 percent. Meanwhile, France's inflation held steady at 1.4 percent.

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