Emre Yumlu 
Euro Area inflation in February fell below expectations, shaping market expectations for an ECB interest rate cut decision.
Eurozone Inflation Lower Than Expected in February
Eurozone inflation decreased more than previously estimated in February, driven by a slowdown in consumer price growth in Germany. According to revised data released by Eurostat, inflation in the 20 euro-using countries was 2.3% in February, lower than the initially reported 2.4%, aligning with economists’ expectations. In Germany, the annual consumer price increase slowed to 2.6% in February, down from the previously forecasted 2.8%.
This decline eased concerns that unexpectedly strong price pressures could hinder expected interest rate cuts by the European Central Bank (ECB). The ECB has stated that uncertainty is extremely high, so it will make its decision after collecting as much data as possible.
The ECB will also factor in trade tensions, increased budget spending, the burden of financing Ukraine’s defense, and falling energy costs. Current market expectations suggest a 50-60% chance of an interest rate cut in April, with a rate cut likely to be confirmed by June. Another rate cut is expected by the end of the year, bringing the ECB’s deposit rate to 2%. The ECB forecasts inflation to oscillate around current levels for the rest of the year, before falling to its 2% target in the first quarter of 2026.
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