Market News

Eurozone inflation jumped to 2.5% in March, as the conflict in the Middle East pushed up oil and gas prices ahead of target. It comes as a stark rise against a rate of 1.9% in February, but below expectations of 2.6%.

Energy costs are expected to have risen by 4.9% during the month, according to a flash estimate from Eurostat on Tuesday, compared with a 3.1% fall in February.

When stripping out energy, inflation fell slightly from 2.4% in February to 2.3% in March, Eurostat said.

Looking at the main components of euro area inflation, energy is expected to have the highest annual rate in March, followed by services (3.2%, compared with 3.4% in February), food, alcohol & tobacco (2.4%, compared with 2.5% in February) and non-energy industrial goods (0.5%, compared with 0.7% in February).

Bert Colijn, an economist at Dutch bank ING, said the increase was “entirely due to higher energy prices”, which have soared since the onset of the war on 28 February. “The price at the pump is the main culprit,” he said.

Meanwhile, Diego Iscaro, head of European economics at S&P Global Market Intelligence, said: “The conflict in the Middle East has had an immediate impact, although the increase in the headline inflation rate was lower than expected.

"The small decline in core inflation is some consolation, but with high energy prices poised to feed into other areas such as food and goods prices, it is likely just a question of time before core also starts trending upwards.

"The combination of rising inflation with still subdued activity represents a challenge for the ECB [European Central Bank]. While communication so far has been measured, indications suggesting that rising energy prices are feeding into inflation expectations are likely to lead the ECB to act by raising policy rates as early as April.”