Euro zone, new inflation record: +7.4% in March

21 avril 2022

Eurozone inflation hit a record high again in March, although the annual rate accelerated to a slightly slower pace than the first reading.

According to Eurostat, the consumer price index increased by 7.4% year-on-year, against 5.9% in February, while the first estimates forecast a rate of +7.5%. In March 2021, recalls the statistics office, annual inflation was +1.7%.

Energy prices, which rose 44.4%, contributed 4.4% to the annual data, while the core index - which excludes energy and food - rose 2. 9% against the 3% forecast, while the monthly rate rose from 2.5% to 2.4% in the flash estimate.

With the price figure about three times higher than the ECB's 2% target, there are growing rumors within the central bank's governing council in favor of action on rates as early as the start of the summer. , as German producer prices hit new all-time highs in March.

After Lithuanian central bank governor Martins Kazaks said earlier this week that he was in favor of raising interest rates in July, several other influential members echoed him. Apart from the most obvious Joachim Nagel, President of the Bundesbank, the change of approach of the "dove" Luis De Guindos, deputy preacher of the ECB, according to which "there is no reason not to end the purchases in July" made headlines.

An end to quantitative easing at the start of the third quarter, the economist told Bloomberg, would mean a rate hike "right after." “From the current point of view, (the rate hike) in July is possible and it is also possible in September, or later,” said De Guindos, who expects inflation to moderate by the end of the month. end of the year.

The prospect of heavier borrowing for the first time since 2012 is starting to be priced in by markets, with short-term rate-linked swaps pricing a 75 basis point rate hike at the end of December 2022 (Bloomberg data). EUR/USD is also on the rise.