The preliminary reading for February showed that Eurozone HICP inflation was still lower than expected, but it continued to fall. Core inflation, which is the main focus of central banks now, rose to 5.6%, an all-time record. This is nearly three times the ECB’s target, and it leaves the central bank on target to continue to hike rates beyond the widely expected 50 basis points in March. This suggests that the pace of change, which was expected in May, is less likely.
The headline HICP inflation fell to 8.5% y/y. This marked the fourth consecutive fall since October last year’s peak of 10.6%. In anticipation of this new decline, the dovish group was vocal and highlighted not only that headline rates are falling but also that rate increases in the past still have an impact on the economy. Chief economist Lane this week also suggested that “there is significant evidence that monetary policy is kicking in”, and that “for energy, food and goods, there is a lot of forward-looking indicators saying that inflation pressures in all of those categories should come down quite a bit”.
There was no sign of this in this week’s numbers though, or indeed in any of the national…
