Eurozone: High inflation weakening somewhat

Status: 03/17/2023 1:14 p.m

High inflation in the euro zone fell slightly in February for the fourth time in a row. Compared to the same month last year, consumer prices increased by 8.5 percent. In January it was 8.6 percent.

In the euro zone, the high level of inflation eased in February for the fourth month in a row, according to a second estimate from the statistics office Eurostat in Luxembourg.

Compared to the same month last year, consumer prices increased by 8.5 percent, while the rate in January was 8.6 percent. In a direct monthly comparison, prices rose by 0.8 percent in February, which also confirmed the first estimate.

Core rate at record high

However, the so-called core annual inflation rate, which excludes volatile energy and food prices, rose to a record 5.6 percent. In January it was still 5.3 percent.

The increase in headline inflation is mainly driven by higher prices for food and beverages. Food, alcohol and tobacco prices rose 15 percent in February from a year earlier; after an increase of 14.1 percent at the beginning of the year.

The increase in energy prices weakened again. Energy prices rose 13.7 percent year-on-year in February, after rising 18.9 percent in January.

The inflation rate was recently particularly high in the Baltic countries. In Latvia, for example, it was 20.1 percent. Luxembourg had the lowest rate at 4.8 percent. According to European calculations, it was 9.3 percent in Germany.

What’s next in the fight against inflation?

In order to counteract the ongoing inflation, the European Central Bank (ECB) raised interest rates sharply again yesterday, but left its further course of action open. It was the sixth interest rate hike in a row since the interest rate turnaround in July 2022. Before the meeting, recent financial market turbulence had fueled doubts about further interest rate hikes.

The monetary authorities, led by central bank chief Christine Lagarde, decided to raise the key rates by half a percentage point, as they did in February. The deposit rate, which is relevant for financial institutions to park excess funds with the central bank, is now 3.00 percent and is therefore an important indicator for the direction of the financial markets.

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