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European Bank ponders four-year inflation high
European Bank ponders four-year inflation high
Time icon10 March 2017, 13:03 pm

In Europe, inflation reached a four-year high point of 2.0 percent during the second month of this year, a statistic that will have focused the thoughts of senior figures within the European Central Bank (ECB). Consumer price inflation indices in the nineteen Euro member countries rose by an average of two percent in the twelve months to the end of February, itself an upward trend from the January figure of 1.8 percent. Additionally, producer or manufacturing price inflation was considerably higher at some 3.5 percent, compared to only 1.6 percent the previous month. 

These factors suggest that further upward price pressure on the supply chain may well be on the way. On a more positive note, underlying inflation – the figure with food and energy process taken out of the equation – held reasonably steady at just 0.9 percent. 

Experts consider that this shift in economic conditions will likely put the ECB under pressure to reduce its economic stimulus programme, viz the amount of money that it has been pumping into the European macroeconomy. Nonetheless, policymakers will probably remain mindful of the wider economic circumstances with their watchful eyes on fragile growth, political uncertainty and forthcoming elections. They will also be aware that recent oil price inflation is probably only temporary. 

German savers are thought to be under particular pressure, due to the double whammy of low interest rates and domestic price inflation running at 2.2 percent. According to Markus Soeder, a finance minister from the German region of Bavaria, German savers could be seeing their savings deplete by up to 100 billion Euros a year. Historically, price inflation tends to ring alarm bells for the older generation of Germans, due to the depreciation of the Deutschmark in the early decades of the twentieth century.