(Brussels) Inflation continues to decline on both sides of the Atlantic, but remains at levels still well above the 2% target targeted by the central banks, which are trying to slow it down by regularly increasing their rate.
According to the PCE index, which is favored by the US Federal Reserve (Fed), inflation fell to 5% in February year on year, with underlying inflation, i.e. excluding energy and food , at 4.6%, the smallest difference between the two measures for many months.
The rise in the CPI index, another measure of inflation that refers to the United States and on which pensions are notably indexed, fell in February to 6.0% over one year, its lowest level since a month. year and a half, a sign that the trend is well confirmed.
In a statement, US President Joe Biden welcomed “progress in the fight against inflation in an environment of low unemployment and sustained growth”, but he acknowledged that this fight “is not over”.
In Europe, inflation also continues to decelerate thanks to a lull in energy prices, but, at 6.9% year on year in March, price increases remain high and are accelerating further in food.
If the trend is positive, the persistence of inflation shows that the battle to bring it back towards the 2% per year target will still be a long one, for the Fed and the European Central Bank (ECB), which should continue to raise their interest rates.
However, with risks: that of plunging the economy into recession, when both the United States and the European Union are expected to experience weak growth this year, but also of further destabilizing a banking sector under surveillance after the bankruptcy of the American bank SVB and the rescue of Credit Suisse.
Annual inflation in the euro zone fell in March for the fifth consecutive month, more strongly than expected by experts polled by Factset and Bloomberg, who expected an average of 7.1%, after 8.5% in February.
Consumer price inflation, published by Eurostat, reached a record in October, at 10.6% year-on-year, after a year and a half of uninterrupted rise, accelerated by the war in Ukraine.
The improvement in March was primarily driven by a slight decline in energy prices from the very high levels they reached a year ago after Russia invaded Ukraine.
Energy prices (fuel, electricity, gas, etc.) fell by an average of 0.9% over one year, their first decline in a year. They still rose by 13.7% in February and the sectoral increase had peaked in October with a jump of 41.5%.
The bad news, however, comes from food prices, whose rise accelerated to 15.4% in March, after 15% in February.
Corrected for volatile energy and food prices, so-called “core” inflation, which is more representative of long-term trends, increased further to 5.7% in February, a record level well above the 2% inflation cap set by the ECB.
During a meeting with students in Florence (Italy), ECB President Christine Lagarde also felt that this figure remained “significantly too high”.
Industrial goods inflation slowed to 6.6% (-0.2 points from the previous month). But service prices rose 5%, or 0.2 points more than in February.
“Underlying inflation remains a matter of concern for the ECB (which) will continue to raise rates in the short term,” commented Bert Colijn, economist for ING Bank, who expects a 25 basis point hike in May and then again in June.
Capital Economics expert Jack Allen-Reynolds agrees. “ECB policymakers won’t dwell too much on the decline in headline inflation in March and will be more concerned that the underlying rate has hit a new all-time high,” he said.
This expert expects a further fall in energy prices in the coming months, as well as a slowdown in the rise in food prices and overall inflation in the euro zone. But he is worried about possible salary increases which could fuel higher prices for services, in a context of a tight job market.
Eurostat on Friday announced a stable unemployment rate in February at 6.6% of the working population, its lowest historical level in the 20 countries sharing the single currency.
The ECB has already raised its key rates by 3.5 percentage points since July and does not intend to stop there, despite the recent turbulence affecting the banking sector and very weak growth forecasts for this year.
The Fed is also determined to bring inflation back in line with rate hikes, but the crisis in the banking sector prompts it to be cautious. This crisis leads to a tightening of credit conditions which is equivalent to a rise in rates, underlined the chairman of the Fed, Jerome Powell.