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Friday, 28 February 2014
Euro-Area February Inflation Rate Exceeds Forecasts
By Ian WishartFeb 28, 2014 2:35 AM PT
Photographer: Balint Porneczi/Bloomberg
An employee, left, takes a euro currency note from a customer at a seafood stall in the... Read More
The euro-area inflation rate exceeded economists’ forecasts in February, easing pressure on the European Central Bank to take action next week to foster the fragile economic recovery.
Consumer prices grew an annual 0.8 percent, the same pace as in the previous two months, the European Union’sstatistics office in Luxembourg said today. That exceeds the median estimate of 0.7 percent in a Bloomberg News survey of 41 economists. The ECB seeks a rate of just under 2 percent over the medium term.
The unemployment rate, which ECB President Mario Draghi has cited as contributing to low inflation, held at 12 percent in January, just off the euro-era record of 12.1 percent last seen in September, Eurostat said in a separate report today.
Today’s inflation report “shows that there is no threat of fully fledged deflation,” Carsten Brzeski, an economist at ING Group NV in Brussels, said by telephone. “The situation has not worsened, which also means right now that there’s no imminent reason for the ECB to act again.”
The euro extended gains against the dollar after today’s report was released, trading at $1.3805 at 11:29 a.m. in Brussels, up 0.7 percent on the day.
Draghi on Feb. 6 put investors on a month’s notice for further economic stimulus, saying the Frankfurt-based central bank needed “to get more information” on the recovery before making any decision. “We are willing and we are ready to act,” Draghi said after the ECB held its benchmark interest rate at a record-low 0.25 percent.
Energy prices fell 2.2 percent after a 1.2 percent decline in January, today’s report showed. “In recent times, energy price developments in particular put downward pressure on headline inflation, a phenomenon that has contributed to weaker inflation at the global level,” Draghi said yesterday.
Prices of alcohol, food and tobacco increased 1.5 percent, following a 1.7 percent rise in January, according to Eurostat. The cost of services rose 1.3 percent after a 1.2 percent jump. The core inflation rate, which excludes volatile items such as energy, food, alcohol and tobacco, rose 1 percent, exceeding economists’ estimates.
“The big picture is clearly that price pressures in the currency union are very weak,” Jonathan Loynes, chief European economist at Capital Economics Ltd. in London, said before today’s data were released.
The unemployment rate, which has been stable since October, conceals extreme regional differences, with Spain at 25.8 percent in January and Austria at 4.9 percent. In Germany, the euro zone’s biggest economy, the rate stood at 5 percent, down from 5.1 percent in December.
Joblessness among people under the age of 25 held at 24 percent in January, today’s report showed, with 54.6 percent of young Spaniards out of work.
Draghi said on Feb. 6 that “although unemployment in the euro area is stabilizing, it remains high,” and called on governments to “continue with product and labor-market reforms” that will help to “enhance the euro area’s growth potential and reduce the high unemployment rates in many countries.”
Today’s inflation data are estimates. The statistics office will release final figures for February on March 17. The ECB announces its next rate decisions on March 6.