Euro zone inflation posts record drop but core prices accelerate

A sign reading “Low prices for you” is seen on a shopping trolley in a supermarket in Nice, France, March 1, 2023. REUTERS/Eric Gaillard/File photo

FRANKFURT  – Inflation in the euro zone dropped by the most on record in March but growth in core prices accelerated, Eurostat data showed on Friday, likely strengthening the case for more interest rate hikes by the European Central Bank.

Consumer prices rose by 6.9 percent in March after an 8.5 percent increase in February, implying the biggest deceleration since Eurostat started collecting data in 1991.

The fall was almost exclusively due to a drop in energy prices compared to March last year, when they had surged in the wake of Russia’s invasion of Ukraine.

But an index that excludes energy and food prices, known by economists as core inflation and seen as a better gauge of the underlying trend, accelerated slightly to 7.5 percent from 7.4 percent in February.

https://business.inquirer.net/389150/euro-zone-inflation-eases-in-february-but-core-prices-surge

Analysts polled by Reuters had expected headline inflation in the 20 countries that share the euro to come in at 7.1 percent and core inflation at 7.5 percent.

After a record streak of rate rises, the ECB has refrained from committing to more hikes, saying this will depend on whether the current turmoil in the banking sector subsides and on data including underlying inflation.

But several ECB policymakers including chief economist Philip Lane have said recently that more increases in borrowing costs are likely to be needed to bring inflation back to the central bank’s 2 percent target.