EMU February And March CPI: A Breakdown
Marc Chandler | Apr 01, 2014 01:37AM ET
This Eurostat . It shows the breakdown in today's preliminary March CPI reading. The 0.5% represents a new 4-year low.
Although the March pace is less than half of the ECB's forecast, expectations are decidedly against action at this week's ECB meeting. Moreover, German Finance Ministry's jarring claim that see possible ECB rate increase, drove home the point. This also helped the lift the euro further.
ECB officials have played down the significance by 1) noting that two thirds of the decline in price pressures to the fall in energy prices and unprocessed food price, 2) seasonal distortions caused by the calendar effect of Easter, and 3) economic activity has improved and there is "light at the end of the tunnel". That said; we note that the core rate of inflation is 0.8%, suggesting that something beside energy and food are dampening prices. In addition, the "light at the end of the tunnel" is a weak and fragile recovery after a double dip recession. The anemic growth makes it more difficult to stabilize the debt/GDP ratios.
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