Easter price push keeps ECB on track for ending stimulus

BRUSSELS / Reuters

An early Easter helped drive a pick-up in euro zone inflation in March, keeping the European Central Bank on track with preparations to wind down its huge stimulus programme in coming months.
Inflation in the 19 countries sharing the euro was 1.4 percent year-on-year, European Union statistics office Eurostat estimated on Wednesday — in line with market expectations and up from 1.1 percent in February.
That also put the pace of price rises on a par with the full-year forecast outlined by the ECB, where a debate is in full swing on how and when to end the 2.55 trillion euro purchase scheme it launched in 2015 to fight off the threat of deflation.
The March rise, to the fastest pace of inflation so far this year, was partly due to an earlier Easter pushing up the price of package holidays and accommodation, a rise in the
indicator’s services component to 1.5 percent suggested.
While inflation remains short of the ECB’s target of near 2 percent, several policymakers now see it as robust enough to start winding down the purchase programme. “This year’s low point of the inflation rate is behind us,” Alexander Krueger, an economist at Germany’s Bankhaus Lampe, said.
“The foreseeable further increase in the inflation rate should encourage the ECB to slow down its asset purchases from October onwards and to end them in December.” Two ECB policymakers, Klaas Knot and Ewald Nowotny, said last week the risk for the central bank was to move too slowly in withdrawing its extraordinary stimulus measures.
The ECB’s favoured core inflation measure, which strips out volatile energy and unprocessed food prices, rose to 1.3 percent year-on-year in March from 1.2 percent in February, also as expected.
“With core inflation unchanged at a low level, the Bank will continue to stress its patient and persistent approach to monetary policy normalisation,” Jessica Hinds, an economist at Capital Economics, said. Separately on Wednesday, Eurostat said unemployment in the euro zone fell to a nine-year low of 8.5 percent in February, from 8.6 percent in January.