Eurozone inflation for February has been revised down, primarily due to adjustments made for Germany, as reported by Eurostat on Wednesday. This reduction alleviates some concerns regarding ongoing strong price pressures that might hinder future interest rate cuts by the European Central Bank (ECB). The inflation rate in the 20 countries that use the euro was recorded at 2.3% in February, slightly lower than the initially reported 2.4%. This figure aligns with earlier estimates from economists.
While the overall inflation figure has seen a revision, the underlying inflation—which excludes the more volatile food and energy prices—remains steady at 2.6%. However, the monthly growth rate for these underlying prices was adjusted down from 0.6% to 0.5%. Although the adjustments in the inflation data are significant, they are not expected to heavily influence the expectations regarding the ECB’s meeting set for April. The ECB has indicated that the current level of uncertainty is quite high and that it will continue to gather data before making any decisions.
There are several factors that the ECB must consider, including trade tensions, anticipated increases in budget expenditures, the ongoing financial support for Ukraine’s defense, and declining energy prices. Market predictions suggest there is a 50% to 60% likelihood of an interest rate cut in April, with many traders anticipating a rate reduction by June. Additionally, another cut is expected by the end of the year, which would lower the ECB’s deposit rate to 2%. The bank forecasts that inflation will hover around its current level throughout the year before reaching its 2% target by the first quarter of 2026.