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A salesman prepares a bag of sweets for a customer at the Sicilian pastry shop Mazzone on February 2, 2024 in Catania, Italy.
Fabrizio Villa | Getty Images News | Getty Images
Inflation in the 20-nation euro zone fell to 2.6% in February, preliminary figures released on Friday showed, but both headline and core inflation were better than expected.
The headline forecast from economists compiled by Reuters was 2.5%.
Core inflation, which excludes volatile factors such as energy, food, alcohol and tobacco, was 3.1%, above expectations of 2.9%.
According to the European Union Statistics Office, food, alcohol and tobacco had the highest inflation rate in February at 4%, followed by services at 3.9%.
Energy prices, which soared last year as a result of Russia’s invasion of Ukraine, continued to fall, and the deflation rate moved from -6.1% to -3.7%.
The previous headline for January was 2.8%, with expectations for further easing as price increases had come to a halt in Germany, France and Spain.
Investors are looking for clues about when the European Central Bank will start cutting interest rates, with market prices pointing to a cut in June. However, many ECB officials still stress the need to conclude spring wage negotiations before getting a clearer picture of domestic inflationary pressures.
February’s numbers will be a mixed bag for policymakers, as core inflation remains above 3% even as headline interest rates move towards the ECB’s 2% target. Still, the rate of price growth has slowed significantly from its peak of 10.6% in October 2022.
The ECB will also have to contend with economic stagnation in the eurozone following its exit from the eurozone. narrowly avoided recession Last year, gross domestic product (GDP) growth was flat in the fourth quarter.
European stocks rose 0.2%, up from 0.5% in the morning, slowing after inflation reports. The euro was flat against the US dollar and the British pound.
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