Financial Times: The surge in the price of oil has pushed eurozone inflation above the European Central Bank’s target, but policymakers in Frankfurt are expected to ignore the rise as broader price pressures across the region remain weak. Headline inflation rose to 2 per cent in the year to June from 1.9 per cent in May, according to a preliminary estimate published by the European Commission’s statistics bureau, Eurostat, on Friday.
While that leaves inflation above the ECB’s target of just under 2 per cent, officials are expected to maintain their exceptionally loose monetary policy. Friday’s inflation data will make little difference to the ECB’s reading of the economy./ If the effects of the oil price and higher food costs are stripped out, the figures present a picture of an economic zone still struggling to produce the sort of consistent rise in inflation seen as necessary to keep growth smooth. A core measure of inflation, also published by Eurostat on Friday, was just 1 per cent, down slightly on the May figure of 1.1 per cent.
Central banks across the world tend to target headline inflation rates, yet policymakers must also examine any short-term spurts and set their monetary policies based on what they think price pressures will look like two or three years from now. The ECB wants to see a consistent rise in broader, underlying price pressures before it ditches more of its monetary stimulus.
