ECB Vice-President Luis de Guindos said that consumer inflation in the eurozone is likely to continue to decline, but new economic data should confirm this forecast so that the ECB can begin to ease monetary policy.
The ECB has kept rates at record high levels since September 2023 and opposes premature rate cuts, saying wage growth is still too fast.
According to official data, consumer price growth slowed in January, confirming experts' forecasts and preliminary estimates. Meanwhile, core inflation fell to its lowest level since March 2022. The consumer price index rose by 2.8% per year after an increase by 2.9% per year in December. European Union annual inflation was 3.1% in January, down from 3.4% in December. Meanwhile, on a monthly basis, the consumer price index fell by 0.4%, confirming economists' forecasts and offsetting the December increase (+0.2%). Eurostat reported that the core consumer price index - excluding energy, food, alcohol and tobacco - rose by 3.3% per year, as expected, after an increase by 3.4% per year in December. Core inflation has been declining for the 6th month in a row.
"As soon as we see clear evidence that inflation is approaching the target level (2%), then the direction of monetary policy will change," de Guindos said, but warned against pressure from a rise in wages though productivity evolution was still contained in Europe, triggering an increase in companies' costs.
The next ECB meeting will be held on March 7, while economists are confident that rates will remain unchanged again. However, updated economic forecasts may prompt discussions on monetary easing over the coming months. Currently, investors expect the ECB to start cutting rates in June and reduce them by 88 basis points by the end of this year.