The annual inflation rate in the euro area came in at 1.9% in February, up from 1.7% in January, Eurostat’s data revealed on Wednesday. In the EU, the annual inflation rose to 2.1% in February, up from 2% in January.
Services saw the highest annual rate during the month at 3.4%, followed by food, alcohol, and tobacco at 2.5%, and non-energy industrial goods at 0.7%. On the other hand, energy prices decreased by 3.1% in the month.
Excluding the more volatile items of food, alcohol, tobacco and energy, core inflation rose to 2.4% from 2.2%, as expected.
Both the headline figure and core reading were in line with preliminary estimates released two weeks ago.
The highest inflation rates were seen in Romania with 8.3%, Slovakia at 4%, and 3.9% in Croatia. Meanwhile, the lowest annual rates were seen in Denmark with 0.5%, the Greek Cypriot Administration at 0.9%, and the Czech Republic (1%).
On a monthly basis, consumer prices went up by 0.6% in the euro area, below estimates of 0.7%.
Read more: Energy price surge derails expectations for Bank of England interest rate cuts
It comes as the European Central Bank (ECB) is set to announce its latest decision on interest rates on Thursday, along with the Bank of England (BoE).
Both are widely expected to keep rates on hold as they await clues for how the Iran war will affect inflation. But as it is the first rate-setting meeting since the Gulf crisis erupted on 28 February, comments on the outlook for consumer prices and monetary policy will be closely monitored by financial markets.
Financial markets are now betting on a quicker response from central banks to signs of inflation creeping through economies. Inflation is expected to rise, but whether that turns into an inflation shock will depend on the duration of the conflict, and also when tankers are able to travel through the key Strait of Hormuz again.
A quarter of a percentage point ECB rate increase, from 2% currently, has been priced in by July, and an 85% chance of a second hike by the year end. They have also halved the number of Fed rate cuts expected this year to one.
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