The Reserve Bank of New Zealand is credited with being the first central bank to adopt a formal inflation target. Following last year’s election, the central bank’s mandate has been modified to include full employment. To be sure this was a political decision, and one that initially saw the New Zealand dollar retreat.  

The dual mandate that originated with the Fed has been questioned in the US, but Congress has shown little enthusiasm for changing it. The dual mandate would seem to give officials greater flexibility. The ECB in contrast focuses exclusively on inflation, and as we shall see, this may pose a challenge for communicating an end to its asset purchases.  

The Great Graphic shows the harmonized measure of CPI for the four largest EMU countries: Germany (white), Italy (yellow), France (green), Spain (fuchsia). Spain released its preliminary March CPI earlier today. The year-over-year pace rose to 1.3% from 1.2%. The median forecast in the Bloomberg survey was for a rise to 1.5%. The preliminary report does not distinguish core prices, but it is possible that the core rate eased a touch. The rise of the headline rate may have been the result of the base effect related to electricity and gas costs. 

Germany reports its preliminary March on Thursday, followed by France and Italy on Friday. German headline inflation is expected to rise to 1.6% from 1.2%. France is expected to increase to 1.5% from 1.3%, and Italy from 0.5% to 0.8%.  

Next week, the eurozone’s preliminary estimate will be reported. It is expected to have ticked up to 1.4% from 1.2%, while the core is expected to have risen to 1.1% from 1.0% where it was in January and February. It was last at 1.1% last September, having peaked in April and July 2017 at 1.2%. If there is disappointment it could be that the core rate was unchanged. The headline rise may be traced to energy, food, and non-alcoholic drinks.