Eurozone January Inflation Marginally Improves; ECB’s March Meeting In Focus

According to recent flash estimates from Eurostat, Eurozone's January headline inflation increased to 0.4% from 0.2% y/y. The improvement was partly a result of base effects of energy prices as well as a surge in core inflation that grew to 1.0% from 0.9% y/y (excluding energy, food, alcohol and tobacco). Inflation in non-energy industrial goods edged up to 0.7% y/y, recording its highest rate in two and half years

Headline inflation likely to fall in the red zone in the upcoming months if the rebound in oil prices does not sustain.

The ECB continues to be wary on its current monetary stance as its stimulus might not be adequate to achieve the inflation target.  Although, the ECB has signaled the market for more monetary stimulus, the recent surge in oil prices and growing inflation expectations further weigh on the ECB. The central bank is likely to announce more easing measures in its March meeting.