Preliminary data published by Eurostat showed that eurozone annual inflation declined slightly in February, reaching the lowest since last May, while core inflation growth accelerated to a record high.
According to the report, the consumer price index rose by 8.5% per year after an increase by 8.6% in January. Economists expected an increase by 8.2%. Given that inflation remains well above the ECB's 2% target, Central Bank policymakers will almost certainly raise the interest rate by another 0.5% at the March meeting. Investors now see the ECB's deposit rate rising by a combined 100 basis points in March and May, then to around 4.1% at the turn of the year as markets have priced in an extra 50 basis points of hikes in just the past month.
Meanwhile, on a monthly basis, the consumer price index rose by 0.8% after falling 0.2% in January. This was the first increase in the last four months.
Eurostat reported that the core consumer price index - energy, food, alcohol & tobacco - rose by 5.6% per year after an increase by 5.3% per year in January. Economists had expected a 5.3% increase.
The data showed that the growth of the overall consumer price index was due to an increase in the cost of food, alcohol & tobacco (+15.0% compared with +14.1% in January), energy (+13.7% vs. +18.9%), non-energy industrial goods (+6.8% vs. +6.7%) and services (+4.8% vs. +4.4%).