After four months of rising inflation, eurozone consumer prices edged lower in February 2025, though not as much as economists had expected. The persistent price pressures could complicate the European Central Bank’s (ECB) plans for rate cuts later this year.
Inflation Eases, But Less Than Expected
According to Eurostat’s flash estimate, the eurozone’s annual inflation rate dropped to 2.4% in February, down from 2.5% in January. However, it remained above economists’ forecast of 2.3%, signaling challenges in returning to the ECB’s 2% target.
On a monthly basis, inflation surged 0.5% from January, marking the biggest increase since April 2024.
Breakdown of Inflation Categories
- Services inflation: 3.7% (down from 3.9% in January, but still the highest among categories).
- Food, alcohol, and tobacco: Inflation accelerated to 2.7% from 2.3%.
- Core inflation (excluding energy and services): Eased slightly to 2.6% from 2.7%.
Inflation Trends Across Eurozone Nations
- Highest annual inflation: Estonia (5.0%), followed by Croatia (4.7%) and Belgium (4.4%).
- Biggest monthly surge: Belgium (2.4%), marking the sharpest increase in a year.
ECB Rate Cut Plans: A Complicated Path Ahead
With inflation still above target, ECB policymakers face a difficult decision on the pace of interest rate cuts.
- The ECB is expected to cut rates by 25 basis points on March 6, with Bank of America economist Ruben Segura-Cayuela calling it the “last easy cut.”
- Beyond March, the ECB’s path becomes uncertain, with divisions among policymakers likely to emerge over how quickly further cuts should follow.
- BNP Paribas economist Stéphane Colliac warned that elevated services inflation remains a concern, particularly in France.
What’s Next?
The March 6 ECB meeting will be closely watched for hints on future rate cuts. If inflation remains stubbornly high, the ECB may pause or slow down easing measures, impacting borrowing costs and economic growth.
📌 Stay updated for further analysis on eurozone inflation and ECB policy changes!