The eurozone has also released its inflation figures today although to be honest "an" inflation figure for a region so economically diverse is a bit misleading. Still, expectations were that inflation would be minus 0.4% in January and it was rather higher, at minus 0.3%. This is still, obviously, a long way short of the ECB's target of "under 2%".
There's two things that we might say about this. The first being that, as with the US numbers, it's really necessary to pull falling oil prices out of these numbers. The other is that we could even ascribe some of this to the ECB's quantitative easing, even though that hasn't actually started yet.
Here's the basic news:
Official figures show that the fall in consumer prices across the 19-country eurozone eased in February, a development that may assuage market concerns that the region is set to suffer a pronounced period of deflation.
Eurostat, the EU's statistics agency, says Monday that annual consumer price inflation in February was minus 0.3 percent, half the rate recorded in January.
And with a little more detail:
Eurostat said that much cheaper energy, prices for which were 7.9 percent lower in February than a year earlier, and a 0.2 percent decline in prices of non-energy industrial goods were the main factors pulling down the overall inflation index.
Without the volatile energy and unprocessed food components, a measure the European Central Bank calls core inflation, prices grew 0.6 percent year-on-year, the same as in January.
As at the top it's really rather misleading for us to have an inflation index for an area as diverse as the eurozone. What is happening to prices in Greece is very different from what is happening to them in Germany. But that's just the way that everyone pretends in said eurozone. Because we've one currency and thus necessarily one interest rate it's convenient to pretend that we've one inflation rate. And that last just doesn't follow. But given that we've got to have one monetary policy, given that we've the one currency, they're going to carry on calculating just the one inflation rate come what may.
As to the numbers themselves as with the US figures also reported today we do need to pull out that one off effect of fuel prices and so we do, for policy purposes at least, have a positive inflation rate.
Finally, we can attribute some of this rise in inflation to the ECB's QE program, even though it hasn't started yet. The reason being that monetary policy is forward looking: the whole point of it is to influence expectations. The ECB's announcement that it was going to start QE was made back a few months. An immediate reaction to said announcement was that the euro fell on the FX markets. And a falling currency does increase domestic inflation in the short term (the reason why being the J-Curve) and so we really can ascribe some part of this rise in inflation to something that hasn't actually happened yet: eurozone QE.
