Today the focus was on the euro area Consumer Price Index (CPI) data. According to Eurostat’s preliminary estimate, the headline inflation fell slightly to 8.5% in February 2023, from 8.6% the prior month and the lowest since May 2022. However, the data was above market forecasts of 8.2%. Core inflation reached 5.6% in February 2023, a new record high and above market forecasts of 5.3%. Prices slowed for energy (13.7%), while prices for food, alcohol & tobacco increased at a faster pace (15.0%). Among the biggest economies in the Euro area, inflation in Germany (9.3%), France (7.2%), Spain (6.1) and the Netherlands (8.9%) accelerated. Market reaction was flat after the release of the data, that was a bit higher than expected.
Inflation remains well above the European Central Bank’s 2% target. Today, President Lagarde stated on a Spanish television program that interest rate hikes may need to continue after the expected half-percentage point increase at the next monetary policy meeting in two-weeks’ time.