Price rises

Oil Fuels Inflation Debate

  • Why it matters

    Why it matters

    If the ECB has truly met its inflation target for the euro zone, it should tighten its ultra-loose monetary policy to prevent the economy from overheating, fiscal conservatives believe.

  • Facts

    Facts

    • Consumer prices rose by 2 percent in the euro zone in February, according to initial estimates.
    • The ECB’s inflation target for the euro zone is “close to but below” 2 percent over the “medium term.”
    • The ECB decided in December to extend its controversial bond purchasing program until the end of 2017, although from April the volume of bonds purchased each month will be reduced from €80 billion to €60 billion.
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    Audio

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Oelplattform vor der Kueste Kaliforniens im Gegenlicht, drilling platform at the californian coast at back light
Oil is to blame for higher consumer prices in the euro zone. Source: Picture Alliance

Next Thursday, the 25 members of the European Central Bank’s governing council will come together at the bank’s head office in Frankfurt. The group meets once every six weeks to set interest rates and tinker with monetary policy for the 19-nation euro currency bloc.

As ever, one topic will be at the top of the agenda: Inflation.

Only this time, for the first time in four years, the central bank has actually surpassed its own goal: According to initial estimates, consumer prices rose by 2 percent year-over-year in the euro zone in February, as reported by Eurostat, the statistics office for the European Union, on Thursday. It’s the biggest annual inflation since January 2013, and above the ECB’s self-proclaimed target of keeping price increases at “close to but below” 2 percent.

This significant price hike is once again fueling a debate about the ECB’s monetary policy – above all in Germany.

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