Eurozone March inflation revised up to 2.7 percent

AP News
Posted: Apr 17, 2012 6:09 AM
Eurozone March inflation revised up to 2.7 percent

Inflation in the 17 countries that use the euro was higher than predicted in March, largely because of higher energy and transport costs, official figures showed Tuesday.

Eurostat, the EU's statistics office, said eurozone consumer prices in the year to March rose by 2.7 percent, up from the initial prediction of 2.6 percent. March's rate was the same as the previous month's and indicates that price pressures remain despite mounting fears that the eurozone as a whole will fall back into recession.

The surprise increase in inflation has reined in expectations that the European Central Bank will cut interest rates again any time soon. The bank, which is tasked with keeping inflation just below 2 percent, last cut borrowing costs in December, taking its main rate down to the joint-record low of 1 percent.

With oil prices remaining elevated, analysts said inflation could well remain above target for a while yet, even though Europe's dim growth prospects could weigh on consumer demand and wage increases.

Gustavo Bagattini, European economist at RBC Capital Markets, said he expects inflation to start declining in the second quarter of the year but won't average anything below 2.5 percent.

"This is consistent with our 2012 average forecast of 2.4 percent, which is in line with the ECB's forecast, meaning that the governing council will continue to have to accept a higher rate of inflation temporarily," Bagattini said.

The euro pushed ahead after the figures from $1.3145 to a day's high of $1.3173.