The annual rate of inflation in the eurozone rose above the European Central Bank's target for the first time in four years during February, driven higher by another rise in energy prices.
The move above the ECB's target of close to, but below, 2% completes a big turnaround for the inflation measure. As recently as May of last year, consumer prices were below their levels of a year earlier, and the 1% level was breached for the first time in more than three years as recently as December.
However, the surge in inflation is unlikely to prompt a big change in the ECB's policy soon. Policy makers have been at pains over recent weeks to stress that they have yet to be convinced that the current rate of inflation will be sustained when the rise in energy prices comes to a halt.
The European Union's statistics agency Thursday said consumer prices were 2.0% higher in February than a year earlier, the highest rate of inflation since January 2013 and a pickup from 1.8% in January 2017.
However, that acceleration was mostly down to a 9.2% rise in energy and a 5.2% rise in food prices over the year. The core measure of inflation--which strips out items such as energy and food--was unchanged at 0.9%, while prices of manufactured goods rose at a slower pace than in January.
Important in translating the recent rise in energy prices into a sustained boost to inflation is what central bankers call "second-round effects," which occur when businesses raise their charges to cover higher costs, and when workers secure higher wage increases to protect their real spending power.
There are some signs that businesses are beginning to respond to a rise in their energy bills. According to a survey of 3,000 companies by data firm IHS Markit, eurozone manufacturers raised their prices at the fastest rate in over five-and-a-half years during February as their costs jumped.
"Not only are higher commodity prices and the weak euro pushing up firms' costs, but there's also growing evidence of a sellers' market developing for many goods as demand exceeds supply, which suggests core inflationary pressures may be starting to rise," said Chris Williamson, IHS Markit's chief business economist.
Figures also released by Eurostat Thursday showed the prices of goods leaving the eurozone's factory gates were 3.5% higher than a year earlier, the largest annual rise since March 2012. Excluding energy providers, prices rose by 1.5%, a sign that underlying inflationary pressures are building, if modestly.
With unemployment still high, a significant rise in pay deals seems unlikely over coming months. Eurostat Thursday said the jobless rate was unchanged at 9.6% in January, although 56,000 fewer people were without work. Over the 12 months to January, the number of unemployed workers fell by 1.1 million, but that still left 15.6 million without jobs, roughly equivalent to the population of the Netherlands, the eurozone's fifth largest member.
The ECB may need to see a further strengthening of the jobs market before it can be sure that inflation is on course to rise to and stay at its target. And that may take a while.
"Unemployment is so high, it could take years to get down to a level consistent with inflation rising," said David Owen, chief European economist at Jefferies.