Eurozone inflation at 2pc raises questions for European Central Bank policy

The European Central Bank (ECB) has been under pressure to rein in its massive stimulus measures since inflation rose dramatically in December 2016.

"There is no doubt that the European Central Bank will continue to be criticized for its monetary policy, especially in the core countries".

Other data from Eurostat on Thursday revealed a small fall in the number of unemployed people, which left the euro-zone unemployment rate unchanged at 9.6%. While headline inflation is moving upward in line with the central bank's goal of a rate below but close to 2pc, the persistent weakness of core inflation is a source of concern for officials including ECB President Mario Draghi.

Bank officials point out that the current higher inflation figures are the result of comparisons with a period of very low oil prices a year ago, not of fundamental price pressures in the economy.

Analysts' estimates compiled by financial information provider FactSet predict inflation of 1.9 percent for February, up from 1.8 percent in January.

The EU28 unemployment rate was 8.1 percent in January versus 8.2 percent in December.

This trend was also reflected in a survey among purchasing managers, also released on Wednesday.

The goods-producing sector expanded at its strongest rate in almost six years in February, suggesting factories will push up overall growth at the start of 2017.

Last month, Bill Gross warned the USA could fall into recession if central banks shut down quantitative easing programs and accused investors of being addicted to the "methadone" he claims keeps the global financial system running.

"After its meeting next week, the ECB is likely to reiterate its view that the latest pickup in inflation will be transitory and we see the Bank carrying out this year's asset purchases as planned", said Jennifer McKeown, chief European economist at Capital Economics. Those figures are due on Thursday.

The ECB has slashed interest rates and adopted a bond-buying programme worth 2.3 trillion euros to pump money into the region's economy. It has rejected German calls to scale back its stimulus, arguing that core inflation is still too weak. But he underlined Wednesday what he considers the unwanted side effects of the ECB's efforts. Services prices also increased, rising an estimated 1.3%.

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