With regard to price developments, euro area annual HICP inflation was 2.4% in February 2011, according to Eurostat’s flash estimate, after 2.3% in January. The increase in inflation rates in early 2011 largely reflects higher commodity prices. Pressure stemming from the sharp increases in energy and food prices is also discernible in the earlier stages of the production process.
It is paramount that the rise in HICP inflation does not lead to secondround effects and thereby give rise to broad-based inflationary pressures over the medium term. Inflation expectations over the medium to longer term must remain firmly anchored in line with the Governing Council’s aim of maintaining inflation rates below, but close to, 2% over the medium term.