Inflation
in
the
eurozone
fell
to
2.6%
year
on
year
in
February,
down
from 2.8%
in January, according
Eurostat’s
flash
estimate,
but
higher
than
economists’
expectations.
The
European
Central
Bank
is
expected
to
revised
inflation
expectations
lower
at
the
meeting
on
March
7,
but
to
leave
interest
rates
unchanged.
“Inflation
in
the
Eurozone
continued
its
downward
trend
in
February,
with
prices
rising
by
just
2.6%,
down
from
2.8%
in
January,
and
2.9%
in
December.
This
was
slightly
higher
than
expectations
of
a
2.5%
rise,
but
at
least
things
are
moving
in
the
right
direction,”
said
Michael
Field,
European
market
strategist
at
Morningstar.
Core
inflation,
which
shows
prices
without
energy
and
food
costs,
also
fell
to
3.1%
year
on
year.
It
was
at
3.3%
in
January.
In
February,
the
greatest
contributors
to
eurozone
inflation
were
food,
alcohol
and
tobacco
(+4%
year
on
year),
followed
by
services
(+3.9%),
non-energy
industrial
goods
(+1.6%)
and
energy
(-3.7%),
according
to
Eurostat
estimates.
“Core
inflation
also
followed
suit,
coming
in
at
3.1%,
with
this
number
falling
month
on
month
since
July
2023,
confirming
that
record
high
interest
rates
are
indeed
having
a
discernible
impact,”
added
Field. “Together
these
numbers
serve
to
strengthen
calls
for
the
ECB
to
cut
rates,
possibly
sooner
rather
than
later.”
Will
the
ECB
Cut
Interest
Rates
on
March
7?
The
slowdown
in
price
rises
reinforces
speculation
that
the
European
Central
Bank
(ECB)
will
revise
inflation
estimates
downward
at
its
March
7
monetary
policy
meeting.
European
stock
markets
rose
after
the
data
was
released.
“Despite
being
close
to
their
respective
inflation
targets,
central
bankers
in
the
United
States
and
Europe
seem
hesitant
to
cut
rates,”
said
Jonathan
Gregory,
head
of
UK
fixed
income
at
UBS
Asset
Management
in
a
recent
note.
“We
said
in
January
that
market
prices
were
running
ahead
of
schedule
with
regard
to
the
magnitude
of
the
rate
cut
already
discounted
for
the
United
States
and
the
Eurozone
by
the
summer
of
2024.
“As
we
write,
market
expectations
imply
that
the
Federal
Reserve
and
European
Central
Bank
will
each
cut
rates
twice
by
the
end
of
July
(assuming
0.25
percent
for
each
move),
compared
to
the
nearly
four
cuts
discounted
for
the
same
period
a
few
weeks
ago.
Current
pricing
seems
much
more
reasonable
to
us.”
ECB
will
continue
to
monitor
wage
data.
“After
the
peak
of
the
pandemic,
there
was
no
significant
labour
market
movement,
and
this
fuelled
wage
inflation,”
said
Emile
Gagna,
economist
at
Candriam,
who
thinks
that
“the
European
Central
Bank
will
remain
vigilant
to
ensure
that
this
wage
dynamic
does
not
contribute
to
destabilising
inflation
expectations
and
fueling
price
increases.”
However,
risk
seems
to
be
limited,
according
to
Gagna’s
forecast.
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