According to ECB Director Isabel Schnabel, the persistently strong price surge is a concern for the monetary authorities. The economist is keeping an eye on the core rate, which excludes the volatile energy and food prices, as she said yesterday at a conference of the National Association for Business Economics (NABE) in Washington.
Core inflation is now proving to be much more persistent than headline inflation. “And of course that causes some headaches for central bankers, too,” she noted. Schnabel is a member of the six-strong management team at the European Central Bank (ECB) and is responsible for the concrete implementation of monetary policy.
Overall inflation in the euro area has recently fallen further to 8.5 percent in February from 8.6 percent in January. But the core rate rose to 5.6 percent in February from 5.3 percent in January. This could indicate that the phase of high inflation rates in the 20-country community could last even longer than previously thought.
connection with energy prices
According to Schnabel, one of the reasons for the persistently high core inflation is related to energy prices. In this way, more expensive energy affects the entire economy and this is then also included in core inflation, she explained.
The ECB is aiming for two percent inflation as the optimal value for the economy in the euro area. She’s still a long way from that. Economists are currently assuming that overall inflation will continue to fall to 7.1 percent in March. Core inflation, on the other hand, is expected to rise again to 5.7 percent.
