Europe inflation eases barely as shopper ache persists

FRANKFURT, Germany (AP) — Inflation eased solely barely within the 20 international locations that use the euro foreign money because the ache from larger prices for meals and gas persists and offers the European Central Financial institution no purpose to sluggish interest rate increases aimed toward getting costs again beneath management.

The patron worth index reached 8.5% in February in contrast with a yr earlier, a drop from 8.6% in January, the European Union’s statistics company Eurostat stated Thursday. The determine was larger than analysts’ expectations of 8.3%.

Inflation is down from its peak of 10.6% in October however its persistence has stunned economists, with figures from Germany, France and Spain coming in larger than anticipated this week.

Costs for meals, alcohol and tobacco rose 15%, up from an already painful 14.1% in January, outpacing even energy costs amid Russia’s war in Ukraine. Power costs grew 13.7% from a yr in the past however had been decrease than the 18.9% increase in January.

Increased costs for pure fuel, used to warmth properties, run industrial processes and generate electrical energy, have been a key issue pushing inflation larger throughout the economic system. Russia cut off most supplies to Europe final yr because it pressured governments over their assist for Ukraine.

Whereas natural gas prices have fallen as a gentle winter reduces demand for heating, it’s going to take months for these decrease costs to work their manner by way of to lower bills for consumers. In the meantime, larger costs have led to staff demanding larger pay in wage negotiations, usually by way of strikes and protests which have swept Europe.

Extra alarming than the headline determine was core inflation, which excludes unstable meals and vitality costs and can provide a greater sense of whether or not inflation is being baked into the economic system over the long run. That core determine rose to five.6% from 5.3%.

European Central Financial institution President Christine Lagarde has indicated the financial institution will elevate rates of interest by one other giant half-percentage level at its March 16 assembly, and analysts count on extra price rises after that.

Rates of interest affect the price of borrowing throughout the economic system, making it dearer to borrow and spend and thus cooling off demand for items.

“So long as core inflation stays stubbornly excessive within the eurozone, the ECB will proceed mountain climbing charges and won’t think about future price cuts,” stated Carsten Brzeski, chief eurozone economist at ING financial institution.