Home Business Eurozone inflation, which continues to decline, rose 2.6% in February

Eurozone inflation, which continues to decline, rose 2.6% in February

by SuperiorInvest

Inflation rates in most European economies continued to decline last month. Consumer prices in the 20 countries that use the euro as their currency rose at an annual rate of 2.6 percent in February, up from 2.8 percent in January, the European Commission's statistics office reported on Friday.

The sooner inflation rates approach the European Central Bank's target of 2 percent, the sooner the bank may be inclined to lower interest rates, which stand at 4 percent. Christine Lagarde, the bank's president, has said she expects inflation to continue to slow given how much energy prices have fallen from the skyrocketing levels they reached in 2022. The easing of supply chain lockdowns has also eased inflationary pressures.

Still, bank officials remain cautious about when to ease the fight against inflation. At a meeting of the European Parliament this week, Lagarde noted that demands for higher wages were strong, a force that can lead to higher prices. “Wage growth is expected to become an increasingly important driver of inflation dynamics in the coming quarters,” he said.

The bank also closely monitors core inflation, which excludes volatile food and energy prices. That annual figure fell to 3.1 from 3.3 percent, but is still significantly above the headline figure. Consumer prices for some goods and services continue to rise.

Central bankers are scheduled to meet next week, but most analysts do not expect interest rates to fall until mid-year.

Europe's two largest economies, Germany and France, reported declines in consumer prices. Germany's annual rate fell to 2.7 percent in February from 3.1 percent the previous month. France recorded a drop from 3.4 percent to 3.1 percent, its lowest level in two and a half years. In Spain, the annual rate fell to 2.9 percent from 3.5 percent in January.

Italy and Latvia had the lowest inflation rates, below 1 percent. Austria, Croatia and Estonia were at the high end, with rates above 4 percent.

“This is still primarily an energy-based story,” said Carsten Brzeski, an economist at Dutch bank ING, referring to last year's price decline. “What we are seeing in terms of inflation year after year is a drop in oil, gas and electricity prices.”

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