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EZ Future Inflation Update

Underlying price pressures in the euro zone nudged higher in February, an index compiled by the Economic Cycle Research Institute showed on Friday.

ECRI, which designs indices aimed at predicting business cycles in leading economies, said its Eurozone Future Inflation Gauge (EZFIG) rose to 94.6 from a revised 94.5 in January.

"Still, the (gauge) is well below its 2000 highs, suggesting that euro zone inflation will remain subdued," ECRI said.

It said modest increases in inflationary pressures in Italy and Germany in February were mostly offset by declines in price pressures in Spain and France.

The gauge aims to anticipate cyclical swings in the region's inflation rate and changes in official interest rate policy by measuring underlying inflationary pressures, rather than actual inflation rates.

It is similar to ECRI's inflation indices for the United States, Britain and Japan.

The German gauge rose slightly to 78.3 from a revised 78.1 in January but remains below its 2002 high of 80.8. "Thus, despite its upward trend, German inflation is likely to stay relatively subdued in the near term," ECRI said.

The French gauge slipped to 100.8 from a revised 100.9. "After a brief rise last year, the French gauge has declined substantially and is now well below its September 2000 peak," ECRI said. "In February it fell to a four-year low, indicating that French inflation pressures are in a cyclical downtrend."

The Italian gauge rose to 99.2 from a revised 98.3 in January. ECRI said that gauge "has risen modestly since the fall of 2001 and Italian inflation has followed beginning in 2002. That trend is likely to persist for now."

The Spanish gauge fell to 132.4 from a revised 133.2 in January. However, ECRI said, "Despite the latest downtick, the Spanish gauge remains in an uptrend, suggesting that Spanish inflationary pressures are on the rise."