Eurozone Inflation Accelerates Due to Rising Energy, Services Costs

Inflation in the Eurozone accelerated as initially expected in March, mainly driven by rising costs of services and energy, according to the European Union statistics office (Eurostat).

Eurostat said that consumer prices in 19 states rose 0.9% month-on-month, and 1.3% year-on-year, the highest since January 2020, adding that the European Central Bank (ECB) seeks to keep inflation symmetric near 2% in the medium term.

Services were the main driver of the rally, with about 0.57 percentage points, energy prices added 0.43 points, while Food, alcohol and tobacco added another 0.24 points.

Core inflation, which excludes the volatility of energy and food prices, rose 0.8% MoM and 1.0% YoY. A narrower measure excluding alcohol and tobacco showed inflation pick up by 1.0% MoM and 0.9% in annual terms.

The ECB had been expecting a sudden hike in inflation due to temporary factors, warning that inflation could exceed its target by the end of 2021 following its government bond purchases under its €1.85 trillion Pandemic Emergency Purchase Programme (PEPP) in Q2, yet, sees prices retreat below its target for years to come.