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Eurozone Inflation Disappointing But Stable

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Eurostat has just released the latest inflation figures for the Eurozone. The Consumer Price Index (year of year for February) came in at 0.7%, this is slightly lower and was anticipated to remain at the previous reading of 0.8%. More positive however is the Core Consumer Price Index (ex. Fuel / Housing) which came in at 1.0%. Finally, the month on month change was posted at 0.3% against the consensus prediction 0.4% and a previous reading of -1.1%

Inflation readings are currently the key metric for the health of the Eurozone economy. The European Central Bank (ECB), which has very little scope to introduce further stimulus, is struggling to ignite economic activity within the Euro bloc.

The ECB which had previously been targeting an inflation rate of 2% by the end of 2015 has recently revised it’s projections. Although still officially targeting the 2% level the Bank admits that projected figures indicate inflation only reaching 1.7% by the end of 2016. This has markets particularly nervous because it places the Eurozone in a very perilous economic situation as deflation continues to loom as a very real prospect.

The mixed nature of today’s numbers will not be well received by the markets due to the fact that they give credibility to the ECBs recent downward revision of targets. The month on month number in particular was looked to for a stronger pick up in the pace of price growth. On the plus side however the Core inflation reading is moving in the right direction and will offer some solace that the Eurozone price stability crises is very slowly beginning to dissipate.

No statement is anticipated from the ECB but markets will be closely watching the German Bundesbank President and ECB Governing Council Member, Jens Weidmann, when he makes a pre-arranged speech at 3pm (GMT) today.

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