Eurozone inflation reached the ECB target in February - Natixis

Jesus Castillo, Research Analyst at Natixis, notes that according to Eurostat flash estimate, in February the harmonized inflation rate in the Eurozone reached the 2% ECB target for the first time since January 2013 while the core inflation remained unchanged at 0.9% in February.

Key Quotes

“The Harmonized Consumer Prices Index in the Eurozone in February has reached 2% y/y. This is the first time since January 2013 that consumer prices growth rate reached the ECB target of 2%.”

“The core inflation (excluding energy, food, alcohol and tobacco prices) has remained stable at 0.9% for the third consecutive month.”

“This trend is reflecting the acceleration of inflation that we were expecting as a consequence of the energy prices' base effects. Due to some surprises regarding inflation by countries, higher than expected in Italy and lower in Spain and France, the Eurozone average inflation rate released is finally slightly above our forecast (Natixis: 0,3% m/m 1.9 y/y ; Consensus 1.9% y/y).”

“All in all, inflation rate should reach 1.8% in 2017 and 1.5% in 2018. Thus, even though consumer prices has gradually reached the ECB target of price stability (close to 2% but below), the current developments are not durable in our views. So we do not expect a change in the monetary policy stance in the short term. However we continue to believe that the Eurozone growth might be affected by a higher slowdown of consumers spending (due to a weaker purchasing power) that the markets have not yet fully factored in.”