The Eurozone's annual inflation rate stood at 2.6% in February 2024, down from 2.8% in January. A year earlier the rate was 8.5%. This was revealed by Eurostat, the statistical office of the European Union, which thus confirms the preliminary estimate.
Inflation was a trap that forced the European Central Bank (ECB) to raise interest rates on money from 0 to the current 4.5% in just a few months. Discourage companies from asking for loans to stop industry and cool demand, hoping for a rapid reduction in inflation. The last increase in interest rates occurred in June last year in Europe, but inflation has been slowly falling for more than a year and is now very close to 2%, the ideal value that the BEU has planned to achieve. reach by the end of this year.
Inflation is falling, interest rates are not yet
Since the beginning of the year, the markets have been expecting a reduction in rates by the European bank from mid-June, or an overall cut of at least 1% until the end of the year. This means reducing the interest rate from the current 4.5% down to 3.5%. The most optimistic expect a minimal reduction as early as this month, although the president of the European banking institute has long maintained that he will proceed with a rate cut only when inflation is controlled and the signs of a decline are constant and irreversible.
In fact, a new increase in inflation following a rapid reduction in rates would be incomprehensible, risking further intervention by the central bank with disastrous effects for the market. The ECB will pronounce itself again on Thursday, the commission will probably leave rates unchanged, although some believe it is possible to obtain an initial reduction of 0.25%. The markets have been waiting confidently for some time now, reaching ceilings almost everywhere. But it is much more likely that the first reduction will only take place in June, as experts continue to argue, for a maximum of 3 rate cuts until the end of the year.