Eurozone inflation increases less than anticipated in February

Data released on Wednesday revealed that eurozone inflation for February was revised down to 2.3% from the initial estimate of 2.4%, mainly due to adjustments in Germany’s figures.

This revision aligns with economists’ expectations and eases concerns that stronger-than-expected price pressures could delay further interest rate cuts by the European Central Bank (ECB).

While headline inflation was revised lower, core inflation—which excludes volatile food and energy prices and is closely watched by policymakers—remained steady at 2.6%. However, the monthly core inflation rate was adjusted to 0.5% from the previously reported 0.6%.

The revision is unlikely to have a major impact on expectations for the ECB’s upcoming policy meeting in April. The bank has signaled that, given the high level of uncertainty, it will hold off on key decisions until it gathers more data.

The ECB is factoring in elements such as trade tensions, increased government spending, the financial burden of supporting Ukraine, and declining energy costs in its policy considerations.

Currently, markets estimate a 50% to 60% probability of a rate cut in April, with a full rate cut expected by June. Another cut is projected before the end of the year, potentially bringing the ECB’s deposit rate down to 2%. The ECB forecasts inflation will remain near current levels for the rest of the year before gradually declining to its 2% target by early 2026.