Christine Lagarde, President of the European Central Bank (ECB), said that inflation in the eurozone remains high, while there remains high uncertainty about the future prospects for price growth. She added that the tightening of the ECB's monetary policy is just beginning to have an impact on the economy, but its impact may increase against the background of banking shocks.
According to the preliminary report from Eurostat, eurozone annual inflation declined slightly in February, reaching the lowest since last May, while core inflation growth accelerated to a record high. 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%. 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.
Earlier this month, the ECB predicted that consumer inflation would decline during the year and reach 5.3% at the end of 2023 and 2.9% in 2024. But these figures do not take into account the recent turmoil in the banking sector.
Since July 2022, the ECB has raised the deposit rate by a record 350 basis points, to 3%, and financial markets expect the rate to reach 3.5% later this year.
“With high uncertainty, it is even more important that the rate trajectory depends on the data. But the public can be sure of one thing: we will ensure price stability, and bringing inflation back to 2% over the medium term is non-negotiable,” Lagarde added.