Eurozone inflation hits four-year high in February

Tammy Harvey
March 2, 2017

The increase is above the 2.1 percent forecast by economists in a Bloomberg survey and follows a reading of 1.9 percent the previous month. "But a confrontation is looming between very aggressive monetary policy and an economy with stable GDP growth, falling unemployment and normalizing inflation".

Underlying inflation is also weak, holding steady at 0.9 percent last month, suggesting that once the oil price surge passes through the numbers, inflation will fall back down, staying below the ECB's target possibly through 2019.

The headline harmonised consumer price index for the euro area rose to 2.0% from 1.8% in January, according to Eurostat, with energy and food prices up 9.2% and 2.5% year-on-year respectively.

Euro zone annual inflation rose to a four-year high of 2 percent in the month of February, flash estimate data has shown Thursday. That is higher than the ECB target of an inflation rate of close to, but just below 2.0 percent, which the central bank calculates is most favourable for economic activity.

With overall savings of 5 trillion euros ($5.28 trillion) and interest rates at zero, an inflation of 2 percent means German savers are basically losing 100 billion euros per year, Bavarian Finance Minister Markus Soeder said on Wednesday.

Markit economist Trevor Balchin said he expected Germany's quarterly growth rate to accelerate to at least 0.6 percent in the first three months of 2017 from 0.4 percent in the final three months of 2016.

Unemployment in the 19-country single currency area in January meanwhile was 9.6 percent, unchanged from December but holding at its lowest rate since May 2009, Eurostat said. During that time, inflation across the eurozone sank and at several times, consumer prices were actually falling - a phenomenon known as deflation that can hurt an economy as consumers put off purchases in the expectation of lower prices ahead and firms grow reluctant to innovate and invest.

The latest inflation figure was the highest since August 2012, when it was the same.

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