Bloomberg News

Euro-Area March Inflation Rate Exceeds Estimate on Energy

April 17, 2012

The cost of unleaded and diesel fuels is displayed in euros on a sign outside an Agip gas station in Rome. Photographer: Alessia Pierdomenico/Bloomberg

The cost of unleaded and diesel fuels is displayed in euros on a sign outside an Agip gas station in Rome. Photographer: Alessia Pierdomenico/Bloomberg

European consumer prices increased at a faster pace than initially estimated in March, driven by energy costs, complicating the European Central Bank’s task as it tries to push the inflation rate below its 2 percent limit.

Inflation in the 17-nation euro region held at 2.7 percent for a fourth month, the European Union’s statistics office in Luxembourg said in an e-mailed statement today. That’s higher than the estimate of 2.6 percent published on March 30.

The economy may struggle to gather strength as budget cuts and rising energy prices erode consumer spending and company investment. European Central Bank President Mario Draghi on April 4 quashed talk of an early exit from emergency stimulus measures as Spain struggled to borrow in financial markets. Policy makers left the benchmark rate at a record low 1 percent.

“Inflation remains relatively high on the back of one-off factors,” said Annalisa Piazza, a fixed-income analyst at London-based Newedge Group. “However, the ECB has clearly signaled that policymakers are ready to act in a timely manner, should pass-through effects start to put upside risks to medium term inflation.”

The euro extended gains after the data were released, trading at $1.3166 at 11:03 a.m. in Brussels, up 0.2 percent.

Energy Costs

Euro-region inflation may average about 2.4 percent this year and 1.6 percent in 2013, the ECB said on March 8. The Frankfurt-based central bank aims to keep annual gains in consumer prices just below 2 percent.

Energy costs rose 8.5 percent after a 9.5 percent gain in February, while transport gained 4.6 percent, according to today’s report. The price of crude for May delivery was at $103.41, up 48 cents, in electronic trading on the New York Mercantile Exchange at 10:38 a.m. Brussels time. Prices are 3.2 percent higher this year.

The euro-region’s core inflation rate, excluding volatile costs such as energy, rose to 1.6 percent from 1.5 percent in February, the statistics office said. In the month, consumer prices gained 1.3 percent.

To contact the reporter on this story: Patrick Henry in Brussels at phenry8@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net


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