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Inflation in the Eurozone falls, but it is still above the ECB target

ECONOMYInflation in the Eurozone falls, but it is still above the ECB target

CPI inflation in the Eurozone in February was 2.6% year on year (y/y) compared to 2.8% the previous month. The reading was slightly higher than the consensus (2.5%). Inflation is still heading towards the ECB’s target of 2%. On a monthly basis, prices rose by 0.6%. Inflation continues, among others, in services, where prices rose by 0.8% over the month. Core inflation has been falling for several months, however, this time the rate of decline was slower than forecast. In February, the indicator was 3.1% y/y compared to 3.3% y/y a month earlier and the consensus of 2.9%. In our view, today’s data do not change the prospects for interest rates. Future monetary policy will be determined by the upcoming data from the Eurozone economies. The ECB is still on hold. As indicated by President Lagarde, the ECB must be sure that the disinflation process will be enduring and will lead to a target of 2%. Therefore, we expect the first rate cuts only in June.

Bartosz Wałecki, Analyst Michael / Ström Brokerage House

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