Inflation rate in the eurozone: exchange rate reduces external pressure – little impetus from domestic demand

Today’s flash estimate for consumer price developments in February reported an inflation rate of +1.2 percent, 0.1 points lower than in the previous month. The continued strong value of the euro compared with the U.S. dollar is creating low import prices. Overall, today’s number fits in well with our forecast of sluggish price developments in spite of the good economic situation.

The oil price, which plays a decisive role in energy price developments, was around 18 percent more expensive year on year. However, the exchange rate between the euro and the U.S. dollar simultaneously increased by more than 16 percent, largely compensating for the strong price increase for energy products. For other components, the upsurge in prices continued at a moderate or weakened rate, for example in the food and beverage segments. At member state level, consumer price developments slumped for the most part, for example in Germany, France and Italy. Only in Spain did the inflation rate increase somewhat at a low level.

Domestic inflationary pressure remained sluggish in spite of the good economic situation. This was demonstrated not least by the core inflation rate, which excludes the more volatile price components of food and energy prices. It remained unchanged at +1.0 percent.

Volatility in consumer price developments in recent months and years has been caused in large part by external influences such as the energy price and fluctuations in food prices. Aside from a few seasonal effects, price developments for other goods and services, the majority of which are influenced by domestic effects, have shown at most a slightly positive sideways trend, but nothing more. This is reflected in the core inflation rate. As the year progresses, the inflation rate is therefore only likely to moderately increase above its current level.

Rate this article

Thank you for your rating. Your vote:
There is no rating yet. Be the first! Current average rating: 0

Leave an answer

Your e-mail address will not be published. Required fields are marked *