According to figures by Eurostat, inflation among the 20 eurozone nations fell to 2.8% last month, down from December’s 2.9%, as price growth for unprocessed food, energy and industrial goods slowed.
However, underlying price growth, a closely watched measure because it excludes volatile food and energy costs, only declined to 3.3% from 3.4%, and came in above forecasts of 3.2%.
ECB rate cuts needed ‘sooner rather than later’ as GDP flatlines
Meanwhile, services inflation remained sticky at 4% for the third month running, which could point to lingering price pressures driven by solid wage demand.
“The last mile to the 2% inflation target was always going to be the most difficult road to travel, and with a stagnating Eurozone economy, the ECB’s job is far from an easy one,” said Charles Hepworth, investment director at GAM Investments.
Daniele Antonucci, CIO at Quintet Private Bank, said that moderating inflation supports the notion that the European Central Bank looks set to cut interest rates over the next few months.
However, he said the timing of the first rate reduction remains “quite uncertain”, adding that markets “have got somewhat ahead of themselves with their expectations of sharp and fast rate reductions”.
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