The inflation in the 20-nation euro zone was down to 2.6% in February, however this was higher than the expectation of 2.5%. Core inflation (removing energy, food, alcohol, and tobacco) was also reported at 3.1%, that is 0.2% above the expected value of 2.9%. This report comes off a value of 2.8% for inflation in January, indicating further cooling has occurred. In addition to lower inflation, energy prices continue to fall with a deflation rate of -3.7% in February.
The new expectation is that interest rates will begin to come down in June due to the recent inflation figures, however officials say they need more evidence of stable prices to begin bringing interest rates down. The ECB also has to consider the near recession of the past year where they saw flat GDP growth in the final quarter of 2023. It seems we could see interest rates lowered in the summer as inflation moves towards the 2% goal, even though core inflation is holding over 3%.
Source - https://www.cnbc.com/2024/03/01/euro-zone-inflation-q1-2024.html
3 comments:
The EU has been hit hard in recent years with extended periods of high inflation rates. I would be curious to know at what level of price stability which interest rates will begin to drop? Additionally, I will be interested to see how members of the EU's involvement with Israeli apartheid will impact inflation rates as the Nicaraguan government takes Germany to the ICJ,
In terms of inflation, the Eurozone appears to be headed in the right direction, but the central bank will need to exercise caution in order to meet the 2% target and navigate the economic slowdown.
How are recent inflation rates and economic conditions shaping the European Central Bank's decision on whether to lower interest rates?
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