A vendor prepares a bag of sweets for a customer at Sicilian pastry shop Mazzone on February 02, 2024 in Catania, Italy.
Villa Fabrizio | Getty Images News | Getty Images
Preliminary figures on Friday showed that inflation in the 20-country euro zone fell to 2.6% in February, but headline and core figures were higher than expected.
Economists polled by Reuters had expected a headline reading of 2.5%.
Core inflation, which excludes volatile components such as energy, food, alcohol and tobacco, was 3.1% – higher than the 2.9% expected.
The European Union statistics agency said food, alcohol and tobacco prices recorded the highest inflation rate in February at 4%, followed by services at 3.9%.
Energy prices, which inflated last year as a result of Russia's invasion of Ukraine, continued to fall, with the deflation rate moving from -6.1% to -3.7%.
The headline reading was previously at 2.8% in January, with further easing expected after price increases slowed in Germany, France and Spain.
Investors are looking for clues as to when the European Central Bank will start cutting interest rates, with market prices pointing to a cut in June. However, many ECB officials still maintain that they need to conclude wage negotiations in the spring before they have a clearer picture of domestic inflationary pressures.
February's numbers will be mixed for policymakers, with core inflation remaining above 3% even as the headline rate moves towards the ECB's 2% target. However, price rises have eased significantly from their peak of 10.6% in October 2022.
The ECB must also contend with an economic downturn in the euro zone, after the bloc narrowly avoided a recession last year, recording flat GDP growth in the fourth quarter.
European stocks eased gains following the inflation print, trading 0.2% higher, down from 0.5% earlier in the morning. The euro stabilized against the US dollar and the British pound.
