Euro zone’s core inflation rate rose in March, ECB may need to monitor closely

Inflation in the euro zone slowed last month but underlying inflation remained high, Eurostat said on Wednesday, confirming the European Central Bank‘s concerns about persistent price pressures. Consumer prices in the 20-nation euro zone fell to 6.9% from 8.5%, largely due to rapidly falling energy costs. But ECB policymakers are now concerned that high energy costs have permeated the wider economy and affected everything from services to wages, making inflation harder to keep in check. Indeed, inflation excluding unprocessed food and fuel rose to 7.5 percent from 7.4 percent, while inflation excluding alcohol and tobacco rose to 5.7 percent from 5.6 percent, in line with preliminary data. Despite the ECB’s record rate hike of 350 basis points since July last year, core inflation data has continued to rise, which is why most ECB policymakers say more rate hikes are needed. At present, the market tends to expect a small rate hike by the European Central Bank, but investors still believe that there is a one-third chance that the European Central Bank will raise interest rates.