Eurozone inflation eases to 1.2% in February

Inflation in the eurozone eased to 1.2% this month from 1.3% in January, in line with expectations, according to a flash estimate from Eurostat on Wednesday.

Core inflation, which excludes energy, food, alcohol and tobacco, remained at 1%, also in line with forecasts.

Both measures of inflation are well below the European Central Bank’s target of just under 2%.

Energy inflation declined to 2.1% in February from 2.2% the month before, while food, alcohol and tobacco inflation fell to 1.1% from 1.9%.

Jack Allen, European economist at Capital Economics, said February’s decline in headline inflation does not change its view that the European Central Bank will drop the easing bias in its forward guidance at its meeting on 8th March.

"After all, the fall in the headline HICP inflation rate from 1.3% to 1.2% was in line with the consensus forecast. What’s more, it was entirely driven almost entirely by slower food inflation, as well as a small fall in energy inflation.

"Admittedly, core inflation (which excludes food, energy, alcohol and tobacco) was unchanged at just 1.0%. We had expected it to rise slightly. But both the goods and services components edged up, suggesting that there was at least a small increase in the core rate (to two decimal places!).

"Looking ahead, the rise in oil prices since last summer should push the headline inflation rate back above 1.5% by the summer. But our forecasts that oil prices will fall and the euro will strengthen suggest that energy inflation will fall back quickly after that before turning negative in 2019."