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Posted on : Wednesday 17th June 2020 05:24 PM

Eurozone Inflation Ticks up in Hopeful Sign for Central Bank

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Inflation rose in April in the 19-country eurozone, at first glance an encouraging indication for the European Central Bank in its struggle to sustainably raise prices.


The European Union's statistics agency Eurostat said Friday that yearly inflation flashy to 1.7 percent in April from 1.4 percent in March. Core inflation, which excludes volatile items for example food and fuel, jumped to 1.2 percent from 0.8 percent.


Analysts at UniCredit bank said that the rise was boosted by the late date of Easter this year, which twisted a few prices. They expect core inflation to stay back to around 1 percent.


The path of inflation is vital because it influences monetary policy, which consequently has wide-ranging impacts on consumers and businesses. Weak inflation will push the ECB toward keeping interest rates low for longer, holding down borrowing costs for businesses and home buyers, however minimizing returns on savings in bank accounts and other conservative holdings.


The ECB has slashed interest rates and bought 2.6 trillion euros ($2.9 trillion) in bonds over almost four years in an effort to increase inflation toward its goal of just under 2 percent and keep it there constantly. The central bank suppressed the bond purchase program at the end of last year, saying it was rapidly confident that inflation would move toward its goal in time.


The bank had to backtrack amid weak economic data, saying March 7 that it would hold interest rates at existing record lows at least until the end of the year instead of at least until this autumn. Some professionals presume the bank and its president, Mario Draghi, will have to expand the promise to keep rates unchanged into 2020 in an attempt to get inflation higher.


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