Investing.com – Consumer prices in the Eurozone in March rose at a faster pace than preliminary estimates and above the European Central Bank’s 2% target level, underlining the impact of a spike in oil and gas costs caused by the Iran war.
Overall inflation in the 21 countries using the euro currency increased by 2.6% in the twelve months to March, versus an initial estimate of 2.5% and 1.9% in the prior month. Month-on-month, CPI advanced by 1.3%, compared to an early reading of 1.2% and 0.6% in February.
Energy costs provided the bulk of the upward pressure on prices, surging by 5.1% year-on-year, according to Eurostat, the EU statistics agency on Thursday. Several European countries use natural gas imports from the Middle East, particularly Qatar, where energy infrastructure has been targeted and damaged by missile strikes.
At the same time, disruptions to oil supply flows through the Strait of Hormuz have sharply driven up global crude prices.
Despite easing in recent days thanks to hopes for a permanent ceasefire between the U.S. and Iran, both of the benchmarks for European natural gas and crude remain well above pre-war levels.
ECB officials, which had been looking at fairly muted inflation prior to the outbreak of the war in the Middle East in late February, have now been openly debating whether interest rate hikes may be needed to quell renewed price pressures. Investors will have the chance to pour through minutes from the ECB’s March 19 meeting, when interest rates were left unchanged at 2%.
Analysts have suggested that much of the focus for policymakers will center around whether the energy shock is short-lived or feeds into so-called “core,” or underlying, price growth.
Stripping out energy and food costs, core CPI in March was confirmed to have slowed to 2.3% from 2.4% on an annualized basis in February. On a monthly basis, the measure also remained at 0.8%, unchanged from the previous month.