Eurozone inflation falls to 2.4% as underlying price pressures ease

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Eurozone inflation has fallen for the first time in four months to 2.4 per cent, underpinning European Central Bank rate-setters’ hopes that the recent uptick in price pressures is proving temporary.

The February figure, down slightly from the 2.5 per cent rise in prices recorded for the year to January, was slightly worse than economists’ expectations of a fall to 2.3 per cent, according to a Reuters poll.

However, two measures of underlying inflation also ticked down, which economists said would bolster the ECB’s confidence in lowering borrowing costs.

Core inflation, a measure that excludes changes in food and energy prices, was down to 2.6 per cent in February, from 2.7 per cent — a level it has hovered at since September. Services inflation, a core gauge for domestic price pressures, also fell from 3.9 per cent to 3.7 per cent — the lowest level since April 2024.

“The ECB will be relieved to see service price inflation finally easing,” said Diego Iscaro, head of European economics at S&P Global Market Intelligence, adding that he expected weak growth to drag down price pressures further over the coming months.

Tomasz Wieladek, an economist at T Rowe Price, said that despite sticky headline inflation, “the details are better than expected” and provide “the green light for further ECB cuts”.

The central bank is set to meet this week, with rate-setters expected to cut the benchmark deposit rate by a quarter-point to 2.5 per cent.

The central bank targets inflation of 2 per cent over the medium term. It has lowered interest rates five times since June amid expectations of weaker growth.

The region is heavily exposed to tariffs on exports to the US, which US President Donald Trump is set to introduce in the coming weeks.

While investors still expect two additional rate cuts by the end of the year, some are bracing for a temporary pause in April after hawkish rate-setters warned that the ECB should not “sleepwalk” into too many cuts.

Vincent Stamer, economist at Commerzbank, said lower service price inflation should lead to further declines in core prices, adding that the expected ECB rate cuts were “not in danger”.

The euro, which had already been strengthening on the day, was up 0.8 per cent at $1.046.

Executive board member Isabel Schnabel said last month that inflation risks were increasingly becoming “skewed to the upside”, while borrowing costs had eased a lot. Schnabel told the Financial Times that the central bank should “now” start to debate a “pause or halt” to rate cuts.