Euro zone inflation picks up but remains short of ECB target

Inflation across the euro zone picked up in March following four months of decline, but the 2 per cent target set by the European Central Bank (ECB) is still well out of reach.

Annual inflation in March increased to 1.4 per cent from 1.1 per cent in February, according to Eurostat, the statistical office of the European Union.

Despite accelerating economic growth across the euro area, the ECB’s target of just below 2 per cent has not been met despite a series of stimulus programmes since 2014 aiming to boost the rate of inflation.

But with inflation increasing to its highest level since the end of last year, backers of an end to the ECB’s asset-purchase programme will likely argue again for the winding down of quantitative easing.

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The price of consumer goods such as food, alcohol and tobacco had the biggest impact on the figures in March with prices increasing 2.2 per cent year on year.

Growth in the services sector was stronger than in February with the price of goods up 1.5 per cent annually.

Energy prices were also up on the year, although growth had reversed and prices increased 2 per cent in March compared with 2.1 per cent in February. Similarly, in the non-industrials good sector prices increased by only 0.2 per cent annually.

The ECB has forecast inflation in the euro zone to hover at about 1.5 per cent for 2018.