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Eurozone's Inflation Impact on Currency

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Eurozone's Inflation Impact on Currency

The eurozone's inflation rate has shrunk to 2% in February, which is alarming if we take into account that it is the highest inflation rate that has been collected since 2013 and taking into account that the European Central Bank has as main objective to keep the rate close to this figure but never reaching it.

One of the sectors in which this increase of the inter-annual rate in the euro zone has been most noticeable been the energetic sector, in which we have been able to observe in February an increase of 1.1 percentage points, rising from 8, 1% in January to 9.2%. This sector is followed by food, alcohol, and tobacco, increasing by up to seven tenths making it reach the 2.5%. Services increased by a tenth to 1.3% while non-energy industrial goods increased 0.2% in February, compared to a year-on-year increase of 0.5% in the previous month. As for fresh food, these remain at 0.9% since December and in this month of February continue to be maintained in this way.

If we put aside the rise in the energy sector, euro area inflation in February was 1.2%, one tenth higher than in the previous month while excluding the effect of fresh food the rise was 0.9%, in line with the previous month. The underlying remains unchanged below the percentage point, with the official European Central Bank graphs reflecting perfectly that growth will be much slower, estimating that it will at most 1.3% in the year in which we find and will only increase to 1.5 in the following year.

Since the European Central Bank began its quantitative expansion through the purchase of bonds two years ago, prices have risen to 2%, with increases of 3% in the case of Spain and 2.2% in the case of Germany. Since the time the European Central Bank have already spent 1.5 trillion euros in the purchase of bonds to get the prices of the euro zone off the negative side.

Some people from both the European Central Bank and the German government have been advising these two years about the inflationary effects of the decisions taken with this purchase of bonds by the European Central Bank President Mario Draghi, which has not been reflected already that the European CPI was well below previous levels. With these data, we can find very different opinions.

The rapid calculation of the European indicator that has spread today is based on the preliminary information on inflation provided by eurozone member states, as well as based on information on price developments and in this case the energy sector price increase.

The final inflation calculation for February for both the eurozone and the European Union as a whole will be released by the EU Statistical Office on 16 March. After this we will see what happens with the European Central Bank and its president Mario Draghi as he will have to give explanations of the decisions he took two years ago having been warned previously of the inflationary effects that could entail devoting that large sum of money to the purchase of booze to remove the prices of the negative zone.