Eurozone inflation edges down in February, reinforcing expectations of another ECB rate cut

Eurozone inflation slowed to 2.4% in February from 2.5% in January, slightly missing expectations of 2.3%. Core inflation, which excludes volatile food and fuel prices, also eased to 2.6% from 2.7% the previous month.

The decline in consumer prices strengthens the case for another European Central Bank (ECB) rate cut at its policy meeting later this week and fuels expectations of further monetary easing in the coming months.

The ECB has already lowered interest rates five times since last June and continues to signal its commitment to supporting weak economic growth. The eurozone economy has been stagnating for two years, with no clear signs of a significant recovery on the horizon.

A struggling industrial sector, the risk of escalating trade tensions with the United States, the ongoing economic impact of the war in Ukraine, and persistent cost pressures on households are adding to the eurozone’s economic challenges.

Against this backdrop, the ECB is expected to cut its 2025 growth forecast for the fourth consecutive quarter at Thursday’s meeting. However, policymakers are likely to push for measures to stimulate growth while remaining cautious about stubbornly high services inflation, which has only recently started to ease after hovering around 4% for most of the past year.

Despite these concerns, economists are becoming less worried about inflation as a primary risk. Instead, they are shifting their focus to the possibility of a trade war with the US, which could pose an even greater threat to the eurozone’s already fragile economy