The Eurozone data shows that there is inflationary contrast between the 19-nation bloc. Eurozone inflation reached a four-year high of 1.8%, a surprisingly positive result for the region. The economy grew by 0.5% in the last quarter of 2016. However, will the uneven distribution of inflation slow down the Eurozone’s recovery?
While Germany and France emerge from rumble of the 2008 financial crisis, Italy’s forecasts are not so bright. Unemployment rose to 12% in Italy. Meanwhile, a staggering 40.1% of young people in the labour force are out of work.
France’s annual GBP measure came in at 1.3%, disappointing the French government, who were aiming for an increase of 1.5%.
Energy prices helped to prop up inflation, helping inflationary figures to edge closer to the European Central Bank’s target of 2%.
Inflation is expected to ease in the next few months as the impact of higher oil prices subside. Inflationary data, which excludes energy prices, remained unchanged at 0.9%
However, the overall positive inflationary data is unlikely to cause much of a stir from the ECB. Under the current quantitative easing plan, the ECB will buy 780 billion bonds per year. ECB president Draghi downplayed the shift towards inflation, in a recent conference, stating that the underlying inflationary pressures were ‘’subdued’’ adding that a sustained adjustment in inflation would have to be noted before a slowdown in bond purchases could take place.
The European Central Bank has an average inflation target of 2%. However, conflicting inflationary and recovery data from Eurozone regions is likely to result in a continuation of low interest rates in 2017.