The seventeen countries that share the euro are facing mounting price inflation as the economic recovery gains momentum and spreads to countries on the periphery of the bloc, according to The Wall Street Journal. On Tuesday, the European Union reported that the eurozone saw annual inflation rise to 2.4% in February, marking the highest level in 28 months and remaining above the European Central Bank’s 2% target. Economists do not expect policymakers to raise interest rates at the next meeting, however, as core inflation remained low in January at 1.1% year-over-year.
Executive ECB boardmember Jürgen Stark assured last month that the central bank would move “quickly and decisively” to contain any sustained increase in inflation expectations, although Julian Callow of Barclays is looking for nothing more than “a shift in language” in the second quarter. Meanwhile, the European Commission increased its forecast for eurozone inflation to 2.2% for 2011, up from 1.8% previously, while also boosting its growth forecast by one-tenth of a point to 1.6% following strong manufacturing data.
