Eurozone Inflation Fell to 14-Month Low in February

Forex News

Inflation in the Eurozone fell to its lowest level in more than a year in February, but core inflation remained steady ahead of next week’s European Central Bank’s meeting. Official figures from the EU’s statistics agency Eurostat showed the headline inflation rate fell from 1.3% yoy to 1.2% yoy in February, its weakest level since December 2016. However, core inflation, which excludes volatile food, energy, alcohol and tobacco prices, remained steady at 1%. Energy prices increased by 2.1% year-on-year, just short of January's 2.2% rate, but unprocessed food prices fell 0.9%, compared with a 1.1% growth in January.

Hoping to raise inflation back to the 2% target, the ECB has bought over 2 trillion euros ($2.45 trillion) worth of bonds in the past three years to induce investment and consumption. ECB policymakers will next meet on March 8, and will present revised quarterly projections for growth and inflation, which observers think could be key to the central bank’s decision over when to signal a final end to quantitative easing. Markets do not expect big changes in the Bank’s monetary policy. The euro's strength is also awaited to be a factor in the ECB's decision. The currency has eased back from its recent highs against the dollar and volatility is also down.

Speaking to European lawmakers earlier this week, ECB President Mario Draghi said the factors holding back inflation were temporary and merely slowed down the growth in prices, a message that appeared to support expectation for a decision later this year on reducing stimulus.