Eurozone Inflation: March 2022 ECB Policy

Christine Lagarde, President of the European Central Bank.

Daniel Roland | Afp | Getty Images

The cost of living in the eurozone reached another record high last month, raising additional questions about how European Central Bank Rising fast can stabilize consumer prices.

Headline inflation for March was 7.5% year-on-year, according to preliminary data from the European Statistics Office’s Eurostat released on Friday. Headline inflation was 5.9% in February.

The numbers come at a time Russia’s invasion of Ukraine The renewed economic uncertainty has brought some economists to wonder if the eurozone will enter a recession in 2022 – something European officials have so far refused to say.

Prime Minister of Italy Mario TracyFor example, he said last week that the invasion of Ukraine would cause economic damage, but not a recession.

The eurozone has taken unprecedented steps to punish Russia for its decision to invade Ukraine, such as blocking the sale of luxury goods, and these sanctions are having repercussions on the eurozone economy itself.

In addition, war has other side effects, especially higher energy prices – which increase inflation across the block.

President of the European Central Bank Christine Lagarde Earlier this week, he said, “three key factors are likely to increase inflation.”

“Energy prices are expected to remain high for a long time,” he said, adding that “pressure on food inflation is likely to increase” and “global production sanctions are likely to continue in some sectors”.

This economic background leads consumers to be more pessimistic about their forward prospects. “Families are becoming more distrustful and spending can be reduced,” Lagarde said. Speech Wednesday in Cyprus.

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Low costs can even bring economic headaches as businesses sell less, have less space to pay employees and less opportunities to invest.

Higher interest rates

“Euro-zone inflation is expected to rise further than the ECB’s forecast, and will remain very high later in the year, and we do not think it will be long before bank interest rates rise,” European economist Jack Allen-Reynolds, a senior economist, told clients Friday morning.

“We have penciled three 25 basis points rate hikes for this year,” he added.

Analysts in Bernberg expect the first rate hike in the fourth quarter of 2022, followed by three in 2023.

“Thus, the ECB has more time to cut its monetary policy than the US Federal Reserve. The ECB should also act in the end. “

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