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PARIS/MADRID (Archyde.com) – Inflation in two of the region’s largest economies rose unexpectedly this month, data showed on Tuesday, adding to expectations of a rate hike by the European Central Bank and refuting the view that price increases are now rapidly easing.
The European Central Bank plans to raise its main interest rate by 50 basis points in March to 3 percent, but some policymakers have called for more cautious steps after that as the repercussions of previous rate hikes are now starting to show.
Inflation in France rose to 7.2% from 7%, exceeding expectations that it would remain at 7%, while inflation in Spain jumped to 6.1% from 5.9%, far exceeding expectations in a Archyde.com poll of 5.5%.
The data also raises doubts that inflation for the entire eurozone, due to be announced on Thursday, will decline to 8.2% from 8.6%, but economists say that German data due on Wednesday will be more important than data announced on Tuesday.
Some investors believe there is a risk that the European Central Bank will raise interest rates by more than 50 basis points in March.
“Both reports were stronger than we expected, suggesting that inflation will continue… Hence, we do anticipate some upside risk (inflation rates in eurozone data) on Thursday,” said Greg Vouzisi, economist at JP Morgan.
Inflation is still subject to increase in France in some way after it was one of the lowest rates in the euro area, which includes 20 countries during the past year.
In Spain core inflation also accelerated, adding to the ECB’s concerns that price growth is continuing.
(Prepared by Amira Zahran for the Arabic Bulletin – Edited by Ali Khafaji)