PARIS (Reuters) – Inflation in France and Spain recorded an unexpected acceleration in February, figures published on Tuesday showed, leading to an upward revision of expectations for the European Central Bank’s key rates.
In France, the HICP harmonized price index, which allows comparisons with other countries in the euro zone, is up 7.2% over one year, against an increase of 7.0% expected by economists. surveyed by Reuters, as in January.
The first estimate of Spanish inflation in February also shows an acceleration in the rise in prices, from 5.9% to 6.1% over one year, exceeding the 5.5% given by the Reuters consensus.
These figures cast doubt on a slowdown in inflation for the euro zone as a whole to 8.2% as expected by economists polled by Reuters, after rising to 8.6% last month. The publication on Wednesday of the consumer price index in Germany, the largest economy in the community bloc, will be a determining factor.
Markets now expect the ECB to raise rates by another 150 basis points by the end of the year, which would take its deposit rate to 4%.
As for sovereign debt, the yield on ten-year German government bonds, the benchmark for the euro zone, has peaked since July 2011 at 2.662%.
Expectations on the final level of ECB rates increased by more than 40 basis points in February, due to concerns about the tenacity of inflationary pressures, in particular underlying ones.
Market expectations have risen so much that some investors fear that the central bank will raise rates by more than half a point next month, despite its explicit announcements to do so.
“Both data were stronger than expected, suggesting greater inflation persistence…therefore, we flag some upside risk to (the first estimate of eurozone inflation) on Thursday. “said Greg Fuzesi, economist at JPMorgan.
“February figures show that French inflation has not yet peaked,” said Charlotte de Montpellier, economist at ING. “Given how core global inflation is likely to continue to rise in the coming months, this will give the European Central Bank additional arguments to continue raising rates beyond the first quarter.”
(Balazs Koranyi with Kate Entringer, Joao Manuel Mauricio, Belén Carreño, Stefano Rebaudo, French version Laetitia Volga, edited by Matthieu Protard)
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