Euro zone headline, core inflation slowdown confirmed for March

BRUSSELS (Reuters) - Euro zone inflation slowed in March and the core figure dipped, the European Union’s statistics office said on Wednesday, confirming its initial estimates and providing an uncomfortable signal for the European Central Bank (ECB).

FILE PHOTO: The euro sign is photographed in front of the former head quarter of the European Central Bank in Frankfurt, Germany, April 9, 2019. REUTERS/Kai Pfaffenbach

Eurostat said prices in the 19-nation currency bloc rose 1.4 percent in March on the year, from a 1.5 percent increase a month earlier, confirming the previous reading.

The ECB targets an inflation rate below, but close to 2.0 percent, and last week raised the prospect of more support for the euro zone in the face of an economic slowdown.

On the month, inflation accelerated to 1.0 percent, as markets had expected, from 0.3 percent in February.

The core indicator watched closely by the ECB for its monetary policy decisions, which excludes volatile energy and food prices, dropped to 1.0 percent in March on the year from 1.2 percent in February. That was the weakest reading since April 2018, Eurostat data showed, confirming earlier estimates.

This can add to the pressure on the ECB as it battles an economic slowdown which threatens to undo years of stimulus, while many of its own rate-setters think the bank’s economic projections are too optimistic.

A narrower inflation indicator that excludes energy, food, alcohol and tobacco was also confirmed dipping to 0.8 percent from 1.0 percent a month earlier.

Inflation was held back by a slowdown in price rises of food, alcohol and tobacco, which rose 1.8 percent on the year in March after a 2.3 percent rise in February.

Inflation in the services sector, the largest in the euro zone economy, also slowed to 1.1 percent from 1.4 percent in February.

Energy prices were the only major component of the index that accelerated in March, to a rise of 5.3 percent year-on-year from 3.6 percent in February.

Reporting by Francesco Guarascio; editing by Philip Blenkinsop