Eurozone Inflation Hit Record High in March as War Put a Chill on Business
2022.04.01 12:31
By Geoffrey Smith
Investing.com — Inflation in the euro zone hit its highest level since the creation of the single currency in March, as a combination of loose fiscal and monetary policy, supply chain constraints and surging energy prices mixed a toxic cocktail for the economy.
The consumer price index rose 7.5% on the year, from 5.9%, after leaping 2.5% in the month of March alone. The rise in core prices, which exclude more volatile elements such as fuel and energy, was even more severe at 3.0%.
Economists had expected the headline annual rate to rise only to 6.6%.
The numbers were released only a couple of hourse after a raft of closely-watched business surveys showed business activity slowing sharply in March, although they still continued to signal economic expansion. IHS Markit’s purchasing managers index for Eurozone manufacturers fell to 56.5, its lowest level in over a year and also worse than consensus forecasts. The data are among the first to incorporate the timeframe since Russia invaded Ukraine in late February, sparking the worst armed conflict on the continent for 30 years.
The data will pile pressure on the European Central Bank to tighten monetary policy faster than it currently intends to do. The ECB’s deposit rate is still stuck at -0.5%, and it doesn’t plan to raise it until it has wound down its bond-buying program, which will happen no earlier than the summer under its current guidance.
The euro was relatively little affected by the numbers, falling 0.1% to $1.1055, while the yield on the benchmark German 10-Year government bond rose three basis points to 0.58%, having hit a four-year high of 0.72% earlier in the week in response to preliminary German data for the month, before falling sharply on Thursday.
