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Eurozone Inflation To Remain Sticky This Year: IHS Global Insight

4/18/2012 3:53 AM ET

High oil prices may keep Eurozone's consumer price inflation sticky in the coming months, dampening the regions recovery prospects, IHS Global Insight chief UK & European Economist Howard Archer said in a note Wednesday.

IHS Global Insight noted that the rising squeeze on consumers' purchasing power and companies' falling profit margins could weigh on Eurozone's recovery. The firm, meanwhile, expects that the subdued economic activity and rising unemployment are likely to limit underlying price pressures and allow inflation to fall back significantly once the upward pressure from oil prices eases.

According to Archer, the European Central Bank is unlikely to cut interest rates any further despite economic activity in the single-currency bloc has failed to pick up in the beginning of the year, as evidenced by the disappointing purchasing managers' data and weakening economic sentiment. Also, there has been an overall easing in the most serious downside risks facing the Eurozone economies since late-2011, though the region is clearly struggling to come out of recession.

The economist also observed that the central bank may not raise interest rates for some considerable time to come, given the likely extended struggle that the euro area faces to return to sustainable decent growth.

The Eurostat on Tuesday said it revised up Eurozone's March inflation from 2.6 percent to 2.7 percent, reflecting mainly high oil prices and transportation costs. Core inflation, meanwhile, remained stable at 1.9 percent during the month.

by RTT Staff Writer

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