The European Central Bank’s hopes of a rise in underlying inflation were disappointed in March. The headline consumer price inflation eased to 1.4 percent in the month from February’s print of 1.5 percent. The core inflation, which excludes energy, food, alcohol and tobacco, dropped again in the month to 0.8 percent. Even if the fall in core fate is mainly linked to the fact that this year the Easter holiday-related price rise for package holidays takes place in April, as in 2018, in March. However, the core inflation rate excluding package holidays also fell a bit.
The year-on-year inflation rate for energy rose markedly; however, it was countered by noticeable fall in food inflation.
The increase in the core inflation rate repeatedly projected by the ECB has not yet materialized. Meanwhile, the central bank’s satisfaction at the higher wage settlements is expected to have largely evaporated, as these have not yet led to a sustained rise in inflation, even in the service sector, noted Commerzbank. It remains difficult for firms to pass on their higher wage costs to consumers. Soft domestic demand is expected to play a significant role here.
“Today's price data should further depress inflation expectations in the market, all the more so as the headline inflation rate fell to 1.4 percent in March. It is likely to remain well below the ECB's inflation target of close to 2 percent over the rest of the year”, added Commerzbank.
At 12:00 GMT the FxWirePro's Hourly Strength Index of Euro was slightly bearish at -69.5698 while the FxWirePro's Hourly Strength Index of US Dollar was neutral at 26.8201 more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex
