Rise in euro-zone inflation to prove short-lived

The euro-zone economic data released since Christmas has been fairly encouraging and suggests that, for now at least, the region continues to expand at a pretty healthy pace. But on the face of it, there are growing signs that inflationary pressures may be building. Needless to say, were this to prompt the ECB to begin raising interest rates, the impact on the periphery would be disastrous. Encouragingly, however, the bulk of the pick-up in inflation reflects temporary food and energy related rises. And given the large amount of spare capacity in the economy, core inflation is likely to resume its downward trend before too long.