Eurozone inflation hit 7.5 percent in March, an all-time high, according to a flash estimate Eurostat published on Friday, April 1. In February the annual rate had been 5.9 percent.
The ECB aims for 2 percent, the level regarded as price stability. The March figure is more than triple that. Inflation has been outrunning the bank’s target for months, and the new number tightens the bind: how to slow prices without choking growth.
Energy did most of the damage. Prices for it were up 44.7 percent on the year in March, against 32 percent in February. Food, alcohol and tobacco rose 5 percent year on year, from 4.2 percent the month before. Non-energy industrial goods climbed 3.4 percent, a record for that category and up from 3.1 percent. Services rose 2.7 percent, compared with 2.5 percent in February.
Baltics at the top
The spread across member states was wide. Lithuania recorded an estimated 15.6 percent, Estonia 14.8 percent and the Netherlands 11.9 percent. At the bottom, France came in at an estimated 5.1 percent, Portugal at 5.5 percent and Finland at 5.6 percent.
Maddalena Martini, an economist at Oxford Economics, said the war was a factor. “The war in Ukraine has exacerbated some recent price dynamics,” she said. The flash reading, in her words, “surprised once again to the upside.”
What analysts expect
Bert Colijn, senior eurozone economist at ING, pointed to Russia’s war and its uncertainty as a reason April could be worse. High energy costs and supply chain problems will keep pushing prices up, he said, and “even a double-digit inflation print cannot be ruled out at this point.”
He doubted the central bank could do much, since outside forces account for most of the rise. His forecast: the ECB would proceed with care. “The ECB is running out of painless options to battle the current economic problems,” Colijn said. Absent signs of faster wage growth, he expected policy to begin normalizing in the coming months, with quantitative easing ending in the third quarter of 2022 and rate hikes arriving in the fourth quarter of 2022 and first quarter of 2023.
Sources
- Eurozone inflation soars to record 7.5 percent in March
- Euro zone inflation hits record 7.5 pct in March: Eurostat
