Eurozone inflation ticks lower in February, adds to signals of another ECB rate cut

Eurozone inflation slowed to 2.4% in February from 2.5% in January, slightly disappointing expectations at 2.3%, while so-called core inflation, which excludes the most volatile food and fuel price components, eased to 2.6% in February from 2.7% previous month.

Lower consumer prices open way for another ECB rate cut on policy meeting due later this week and also add to bets for further policy easing in coming months.

The ECB has cut interest rates five times already since last June and signals it will remain on easing path to prop up weak economic growth, as the bloc’s economy has been stagnating for two years and without clear signals of any significant recovery on the horizon.

With industrial sector in recession, threats of escalation of trade tensions with the United States, growing pressure from the consequences of the war in Ukraine and households struggling with high prices, continues to darken.

All these factors contribute to scenario in which the ECB will cut its 2025 growth forecast for the fourth straight quarter on Thursday’ meeting, but will try to give the economy fresh boost, although being aware of risk of still too high services inflation, one of the key components of inflation, which slightly eased recently after holding around 4% for most of the last year.

However, economists are less pessimistic about inflation and see it no longer as a major risk, but shift focus to a trade war with the US that could be much more painful for the bloc’s economy.