On Friday 23rd February 2018, Eurostat, which is the statistical office of the European Union (EU) will publish data regarding Eurozone’s Consumer Price Index (CPI) in January 2018. This is going to be the final read of Eurozone’s January 2018 inflation as Eurostat released a flash estimate report on 31st January 2018.
Economists forecast that, during January 2018, inflation in Eurozone stood at 1.3% on an annualised basis. The figure, if confirmed, is 0.1% lower than December’s 2017 inflation reading which had come in at 1.4%. Eurostat is also going to publish data regarding Eurozone’s core inflation in January 2018. Core inflation measures price changes of a basket of goods and services, excluding though volatile components such as food, energy, alcohol and tobacco. Economists predict that core Eurozone inflation stood at 1% in January 2018, on an annualised basis. If the forecast proves accurate, core inflation will have remained unchanged since December 2017.
Eurostat’s flash estimates, which were published in January 2018, showed that out of the main components of euro area inflation, energy is expected to have the highest annual rate in January 2018 (2.1%, compared with 2.9% in December 2017), followed by food, alcohol and tobacco (1.9%, compared with 2.1% in December 2017), services and non-energy industrial goods.
European Central Bank (ECB) and Eurozone inflation
If Eurostat confirms economists’ forecasts that Eurozone’s inflation stood at 1.3% during January 2018, it will be the lowest recorded figure since July 2017. The European Central Bank (ECB) has set a 2% inflation target for the whole Eurozone. ECB’s board members have said that they expect an inflation slowdown over the next few months as energy prices are increasing worldwide. The last time that Eurozone’s inflation hit the 2% target was exactly one year ago, in February 2017.
With inflation remaining below target, ECB policymakers will have more time to consider how and when do they want to end the asset-purchasing or quantitative easing programme (QE) which was utilised to tackle the consequences of the financial crisis that hit the Eurozone’s economies. The Euro’s appreciation against the US Dollar over the past months has put downward pressure on import prices, making even more difficult the ECB’s efforts to get Eurozone’s inflation around 2%.
ECB’s monetary policy
The ECB didn’t make any changes in its monetary policy at the last meeting of its governing council in the 25th January 2018. The ECB’s board decided to keep the Bank’s benchmark interest rate unchanged at 0%. In the statement published after the meeting, the ECB’s board reaffirmed its commitment to extend the duration of the QE program, if conditions require it. The president of the ECB, Mario Draghi, told reporters in the post-meeting press conference that currency strength could make the ECB’s governing council to rethink its monetary strategy.
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