According to a flash estimate by the statistical office of the European Union (Eurostat), consumer prices in the euro area rose sharply on the year in March, with inflation as measured by the Harmonised Index of Consumer Prices climbing to 7.5%, up from around 5.9% in February.

In particular, the main driver of inflation was energy prices, which picked up strongly in light of the war in Ukraine. Energy prices grew by 44.7% on the year; in February, this figure was 32%. Prices for unprocessed foods increased by 7.8%, non-energy industrial goods by 3.4%, and services by 2.7%.

Rise significantly larger than expected

This means the rate of inflation was again considerably higher than had generally been expected, prompting Bundesbank President Joachim Nagel to once again speak out in favour of normalising monetary policy in good time: “We on the ECB Governing Council have been very clear: monetary policy measures are data-dependent. The inflation data speak for themselves. Monetary policy should not pass up the opportunity for timely countermeasures.”

The Harmonised Index of Consumer Prices (HICP) was developed in the European Union to compare price changes from one country to the next and to compile an overall inflation rate for Europe and the euro area. The HICP for the euro area countries is used primarily by the Eurosystem, i.e. the European Central Bank (ECB) and the national central banks, as a core indicator for assessing price stability in the euro area. The Eurosystem aims to achieve an annual HICP inflation rate of 2% over the medium term in the euro area. Germany’s HICP is compiled by the Federal Statistical Office.