Consumer prices in the 17-nation eurozone rose 2.4 percent in the year through January, producing the highest inflation since October 2008, according to Eurostat.
But experts don’t expect the European Central Bank to raise interest rates at its meeting Thursday, even though inflation is well above the ECB’s target of just under 2 percent. The eurozone economy is deemed too weak to handle a rate increase now.
But many economists maintain that continuing price hikes will push the central bank to act later this year.
The inflation increase will almost certainly lead the ECB to voice a "hawkish" anti-inflation tone at its news conference following the meeting this week, but there’s no justification for boosting rates yet, because wages haven't risen in step with prices, says ING Groep economist Martin van Vliet.
“So long as long-term inflation expectations remain well-behaved and second-round effects on wages continue to be absent, there is little reason for the ECB to start normalizing interest rates shortly," he tells The Wall Street Journal.
Van Vliet thinks the central bank is "unlikely to pull the trigger on interest rates until” the fourth quarter.
Others agree. "While the ECB will be far from happy to see euro zone consumer price inflation move further above target, . . . it is still highly unlikely to prompt the bank into action at its February policy meeting," Howard Archer, an economist at IHS Global Insight, tells Reuters.
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