Inflation rate in the EMU falls again – and remains weak

The upswing in consumer prices in the euro zone eased in February. According to preliminary calculations, the inflation rate, measured by the Europe-wide harmonised consumer price index (HICP), fell from 1.4 percent in January to the current 1.2 percent. The inflation rate for food, industrial goods and services even rose slightly. However, energy prices declined year-on-year, which depressed the overall inflation rate.

From the current perspective, inflation is expected to remain subdued in the coming months. While at the beginning of 2020 the course was still set for economic stabilisation in the currency area, the picture has changed with the corona wave. The spread of the corona virus SARS-Cov-2 with the corresponding economic consequences is likely to have a noticeable impact on the economy in the euro zone in the coming months. The expectation of a weaker economy is reflected not least in a significantly lower oil price.

As a result, the inflation trend is likely to be subdued in the coming months. Numerous factors are likely to slow down the price trend. These include falling prices in the area of tourism-related services due to cancellations and also include falling prices for petrol and heating oil due to a weak crude oil price. Inflation is not expected to pick up again until mid-2020. The ECB’s target of an inflation rate of just under two percent is likely to be missed by a wide margin again this year.

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