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European Central Bank President Christine Lagarde said she expected inflation in the region would remain elevated. Data show most prices are on the decline, but a core reading of inflation remains troubling. File photo by Erik S. Lesser/EPA-EFE
March 31 (UPI) -- Inflation for the euro area was estimated to be 6.9% in March, about 1.5% below the rate from February, data from the European Union's statistics office showed Friday, though a less-volatile reading was cause for concern.
Eurostat in a flash estimate for inflation found the price for food, alcohol and tobacco all came in strong, rising from 15% in February to 15.4% in March. Overall prices moderated, however, with the bulk of the decline in inflation coming from energy prices, which declined by 0.9%, compared to a 13.7% increase last month.
Energy prices in the EU were elevated for much of last year as the regional economy scrambled to find new sources of energy to replace Russian resources lost to war-related sanctions. The United States is now filling much of the market void by way of exports of liquefied natural gas, while warmer weather is lowering heating costs.
Supplies in the European market are ample and prices are moderating from record levels from last year, particularly for natural gas. Eurostat data show the price for non-energy industrial goods increased by 6.6% in March, compared with 6.8% in February.
In mid-March, the European Central Bank said that inflation was projected to stay "too high for too long," prompting a rate increase of 50 basis points in an effort to bring inflation closer to its 2% medium-term target rate.
ECB President Christine Lagarde later said the "high levels of uncertainty" injected by the turmoil in the global banking system would factor into any decision to tighten monetary policy further.
Jack Allen-Reynolds, an analyst at London-based Capital Economics, said in a note policymakers like Lagarde likely are focused only on core inflation, which strips out volatile items such as food and energy. At 5.7%, core inflation was higher than last month, which he said was a record.
"Policymakers at the ECB won't read too much into the drop in headline inflation in March and will be more concerned that the core rate hit a new record high," he said.
Most major European market indices were in the black on Friday. Germany's DAX index closed 0.69% higher on the day.
