Inflation in the euro zone eased as expected in March as energy prices grew at a slower annual pace, data showed today.
Eurostat said consumer prices in the 12 countries using the euro grew by 0.6 per cent in March against February. It confirmed its earlier estimate that year-on-year price growth came to 2.2 per cent, down from 2.3 per cent in February.
The year-on-year and monthly rises were in line with market consensus, but economists said the relatively benign data would not prevent the ECB from upping interest rates by 25 basis points in June to 2.75 per cent.
Second-round effects are potential price rises in other sectors of the economy in response to expensive energy as well as demands for higher wages as compensation.
To determine whether such a process is taking place, economists look at inflation without volatile energy and unprocessed food prices, a measure the ECB calls core inflation.
This grew 0.6 per cent month-on-month and 1.4 per cent year-on-year in March, accelerating slightly from 1.3 per cent in February. The monthly gain was in line with market consensus, but the annual rise was above the expected 1.2 per cent.
The ECB wants to keep annual price growth below, but close to, 2 per cent, and markets believe the bank will raise interest rates in June because it is concerned about inflationary pressures from surging oil prices and fast growing credit.
Eurostat said increases in prices of fuels for transport, gas and heating oil were still the main drivers of headline annual inflation in March, while prices of telecoms services and clothes pulled the index lower.
Energy prices grew by 10.5 per cent year-on-year in March, the data showed, slowing from 12.5 per cent annual growth in February and 13.6 per cent in January.