Euro zone inflation stumbles from ECB target

BRUSSELS: Euro zone inflation fell sharply in March to below the European Central Bank’s target, pouring fresh doubts on the ECB’s success in battling to boost consumer prices in Europe.

The EU’s Eurostat statistics agency said the rise in consumer prices slowed in March to 1.5 per cent, marking a big drop from the 2.0 per cent reached in February, the ECB’s target.

The figure for the 19-country single currency zone was also slower than 1.8 per cent forecast by analysts surveyed by Factset, a data company.

Economists in powerful Germany had said two per cent inflation in February meant that the ECB had done its job and could pull back from a controversial stimulus programme.

But ECB head Mario Draghi argued against stopping the policy of low rates and pumping cash into the economy, unconvinced that higher inflation was here to stay.

Beating low inflation was “a gradual process,” Draghi said earlier this month, angering anti-inflation Germany, the euro zone’s most powerful member.

Germany weighed heavily in the lower figure for March after German inflation tumbled this month to 1.5 per cent from 2.2 per cent.

“March’s sharp slowdown in eurozone inflation was partly driven by temporary factors that will reverse in April, but the big picture is that inflation is now on a downward trend,” said Jack Allen, European Economist at Capital Economics.

“There is little sign that declining unemployment is putting much upward pressure on wages and prices,” he added.

A key concern for economists was insistently low core inflation, which excludes volatile elements such as energy and food, that slipped back to 0.7 per cent from 0.9 per cent.