Inflation in the eurozone has shown a decline, which has led to an argument for increased confidence that this indicator is approaching the European Central Bank’s target of 2%.
According to data published by Eurostat, consumer prices in the mentioned region increased by 2.4% in February compared with the reading for the same period in 2024. It is worth noting that in January this indicator grew by 2.5% year-on-year. Experts interviewed by the media predicted that consumer prices in the eurozone would rise by 2.3% in February.
It is worth noting that inflation in the specified region continues to be elevated. Service sector inflation dropped to 3.7% in February. This is the first significant decrease in the mentioned indicator since April last year. Officials of the European Central Bank pay special attention to inflation in the service sector.
After the specified data was published, the euro continued to increase, rising 0.6% to $1.0439. German bond yields remained on an upward trajectory. The rate on 10-year bonds increased by 4 basis points to 2.45%.
The data released by Eurostat is likely to strengthen the hope of European Central Bank officials that they will be able to sustainably reach the price goal in the coming months. Nowadays, they are also facing challenges from the current configuration of the reality of the historical moment, such as flimsy economic growth in the 20-country currency bloc and the threat of tightening the tariff policy of the United States towards the European Union.
It’s worth mentioning that last week, national data on the dynamic of gross domestic product (GDP) demonstrated diverging tendencies. Indicators recorded in Germany, Italy, and Spain remained at the same level on both sides of the target of the European Central Bank. At the same time, the figure shown by France fell 0.9%.
There is still no consensus among officials of the European Central Bank on the approach to further changing monetary policy. Those who adhere to the so-called hawkish position urge caution to avoid cutting interest rates too sharply. Other officials of the financial institution fear that a stuttering economy will trigger a drop in inflation below 2%.
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