Eurozone inflation rises less than expected in February

The data released on Wednesday showed that eurozone inflation for February was revised down to 2.3% from the initially reported 2.4%, primarily due to adjustments in Germany’s data.
This aligns with earlier economist estimates and alleviates concerns that stronger-than-expected price pressures might hinder further interest rate cuts by the European Central Bank.

Despite the downward revision in headline inflation, core inflation, which excludes volatile food and energy prices and is closely monitored by policymakers, remained unchanged at 2.6%. However, the monthly growth rate for core inflation was adjusted to 0.5% from the previously reported 0.6%.

This revision is not expected to significantly influence expectations for the ECB’s upcoming policy meeting in April.
The bank has indicated that due to the exceptionally high uncertainty, it will refrain from making decisions until it has gathered as much data as possible.

Factors such as trade tensions, anticipated increases in budget spending, the financial burden of supporting Ukraine’s defense, and declining energy costs are all being considered in the ECB’s deliberations.

Market expectations currently suggest a 50% to 60% probability of a rate cut in April, with a full rate cut anticipated by June.
Additionally, markets foresee another cut before the year’s end, which would lower the ECB’s deposit rate to 2%. The ECB projects that inflation will hover around the current level for the remainder of the year, before declining to its 2% target in the first quarter of 2026.