Eurozone Inflation Ticks Higher to 1.9%

The February uptick was driven primarily by the services and food sectors. Inflation for services accelerated to 3.4%, while food, alcohol, and tobacco prices rose by 2.6%. Energy prices continued to fall year-on-year, but the pace of that decline slowed to -3.2% from -4.0% in January. Core inflation, which strips out volatile energy and food prices, also rose, reaching 2.4% in February, up from 2.2% the month prior. This increase in the core figure suggests that underlying price pressures are strengthening within the eurozone economy. The European Central Bank held its key interest rates steady at its early February meeting, maintaining the main refinancing rate at 2.15% and the deposit facility rate at 2.00%. The bank has reiterated its determination to ensure inflation returns to its 2% medium-term target. ECB President Christine Lagarde stated in late February that the bank's "decisive monetary policy" has been effective in bringing inflation down from its peak of 10.6% in October 2022. The Governing Council is not pre-committing to a particular rate path, instead following a data-dependent, meeting-by-meeting approach. While the ECB views the economy as resilient, supported by low unemployment, it has also highlighted that the outlook remains uncertain. Key risks cited include ongoing geopolitical tensions and global trade policy uncertainty. Lingering supply chain disruptions continue to exert pressure on businesses. Volatility in global shipping, partly due to the situation in the Red Sea, has impacted lead times, while higher wholesale gas and electricity prices in 2025 also contributed to elevated input costs. Inflationary pressures vary significantly across the currency bloc. In February, the highest estimated annual inflation rates were recorded in Slovakia (4.0%) and Croatia (3.9%), while Cyprus registered the lowest rate at 0.9%.