Eurozone inflation above target for first time in 4 years

Eurozone inflation in February topped the European Central Bank's near-2.0 percent target for the first time since 2013 as its massive economic stimulus appeared to be finally paying off, figures showed Thursday.

Consumer prices in the 19 countries using the euro rose by 2.0 percent from February a year ago - up from January's 1.8 percent.

With inflation now ahead of the ECB's target of just below 2 percent for the first time since January 2013, it may seem like a case of job done for the European Central Bank, which has slashed interest rates and enacted a massive bond-buying program to support inflation and growth.

On a non-harmonized basis, annual inflation also picked up to 2.2 percent after 1.9 percent in January.

The increase has been mostly driven by higher energy prices (+9.2%) and partly by food prices (+5.2%).

As a result, the news is likely to bolster pressure from some European nations for the bank to end its extraordinary monetary policy support for the bloc's economy.

February was the third straight month the rate rose higher than expected, said FawadRazaqzada, market analyst at Forex.com.


The figure was in line with the forecast consensus and left the rate at its highest in over four years but the pick-up entirely reflected higher energy and food inflation, said McKeown. According to a survey of 3,000 companies by data firm IHS Markit, eurozone manufacturers raised their prices at the fastest rate in over 5 1/2 years during February as their costs jumped.

The upward push on inflation by energy prices is equivalent to the drag they were having over the past couple of years, when oil prices tanked from around $100 a barrel to below $30. "But the bank will no doubt recall that the inflation target has to be reached over the medium term and for the whole of the Eurozone".

Some stronger euro area economies - such as Germany, which argues the policies are weighing on its domestic economy - are pressuring the bank to bring its programme of bond buying and low interest rates to an end.

The rate was the lowest registered since May 2009.

The ECB has slashed interest rates and adopted a bond-buying programme worth 2.3 trillion euros to pump money into the region's economy.

Most analysts think the bank will not back off its stimulus but may signal at some point this year its intentions to start tapering it off gradually in 2018.

Unemployment has also fallen steadily. Eurostat Thursday said the jobless rate was unchanged at 9.6% in January, although 56,000 fewer people were without work.


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