Eurozone: Uptick in inflation - ING

Bert Colijn, Senior Economist at ING, notes that Eurozone’s headline inflation came in at 1.4% and core inflation at just 1%, while the labour market continues to thrive with unemployment down to 8.5%.

Key Quotes

“As usual, the timing of Easter has a somewhat distorting effect on core inflation figures. With package holidays more expensive around Easter, core figures tend to push slightly higher.”

“The increase in headline inflation from 1.1% to 1.4% was mainly due to the bounce back of food prices, which dropped significantly in February.In the months ahead, we still expect a weak upward trend in core inflation although our expectations have come down.”

“Labour market conditions continue to tighten with lower unemployment and higher vacancy rates. Unemployment was at 8.5% in February, which is the lowest rate in nine years. Still, with wage growth not showing a meaningful increase, the transmission to price pressures is taking even longer than we were expecting.”

“Nothing in this release seems to justify a more hawkish ECB.”

“A decision about QE is the next big thing to focus on, and with inflation like this, another extension seems to be in the making.”