Eurozone inflation eased to 2.3% in February, with core inflation at 2.6%, its lowest since January 2022. France had the bottom fee (0.9%), Hungary the best (5.7%). The euro slipped forward of Wednesday’s Fed assembly.
Worth pressures throughout the eurozone have been revised decrease in February, reinforcing expectations that inflation is steadily returning in the direction of the European Central Financial institution’s 2% goal.
Headline inflation rose by 2.3% year-over-year final month, down from 2.5% in January and under the earlier estimate of two.4%, in line with Eurostat information launched on Wednesday.
Core inflation, which excludes power and meals, eased to 2.6% from 2.7% in January, marking its lowest degree since January 2022.
Amongst EU members, France recorded the bottom annual inflation fee at 0.9%, adopted by Eire (1.4%) and Finland (1.5%). Hungary (5.7%), Romania (5.2%), and Estonia (5.1%) registered the best charges.
On a month-to-month foundation, Belgium noticed the steepest inflation improve, rising 2.4%, adopted by the Netherlands (1.4%) and Estonia (1.3%). Portugal was the one nation to expertise a worth decline (-0.1%), whereas shopper costs remained steady in Greece and Croatia.
In February 2025, providers contributed probably the most to euro space inflation (+1.66 share factors), adopted by meals, alcohol & tobacco (+0.52 pp), non-energy industrial items (+0.14 pp), and power (+0.01 pp).
Investor sentiment on inflation stays cautious
Regardless of the easing inflation figures, investor expectations on future worth tendencies stay subdued. The most recent Financial institution of America Fund Supervisor Survey indicated that solely a internet 7% of European buyers anticipate decrease inflation within the eurozone over the subsequent yr, the weakest sentiment since April 2022.
In the meantime, 53% of surveyed European buyers imagine the brand new Trump administration can have a detrimental influence on international progress however a constructive impact on inflation.
European markets are additionally reacting to Germany’s just lately introduced fiscal stimulus and expanded European defence spending, each of that are seen as potential progress catalysts. A big 70% of buyers polled view German fiscal stimulus because the more than likely driver of stronger European financial growth.
Market reactions
The euro fell 0.4% on Wednesday, dipping under the 1.09 degree towards the greenback forward of a intently watched Federal Open Market Committee (FOMC) assembly later within the day.
The US Federal Reserve is anticipated to keep up its benchmark rate of interest within the 4.25%-4.5% vary, with Chair Jerome Powell more likely to reiterate a cautious strategy to fee cuts. The central financial institution may also unveil up to date financial projections, together with its inflation outlook and rate of interest forecast—broadly generally known as the “dot plot”.
In December, the Fed had already revised its inflation projections upward whereas decreasing the variety of anticipated fee cuts for 2025 from 4 to 2. There may be broad hypothesis that policymakers could additional alter inflation forecasts to account for potential tariff-related worth pressures below the Trump administration.
Yields on European sovereign bonds edged decrease, with German Bund yields declining three foundation factors to 2.78%.
Equities in Europe traded increased, with the Euro STOXX 50 rising 0.3%, mirroring the positive aspects of Germany’s DAX. Buyers reacted positively to progress on a possible ceasefire in Ukraine.
On Tuesday, US President Donald Trump and Russian President Vladimir Putin reportedly agreed to a 30-day pause in assaults on power and infrastructure websites in Ukraine and Russia.
Trump additionally steered that discussions on an entire ceasefire have been below manner. Oil costs retreated on Tuesday, with Brent crude remaining regular at $70 per barrel this morning.
Italy’s FTSE Mib and France’s CAC 40 outperformed, gaining 0.9% and 0.6%, respectively, largely pushed by financial institution inventory positive aspects.
Shares of Banca Monte dei Paschi di Siena – the world’s oldest financial institution – surged greater than 3% to €7.87, reaching their highest degree since August 2022, after Deutsche Financial institution upgraded the inventory from ‘Maintain’ to ‘Purchase’.
Analysts at Deutsche Financial institution steered that buyers have been overlooking alternatives within the financial institution’s bid for Mediobanca, whose shares additionally rose 1.9%.