Eurozone Inflation Impedes Prospects Of Early Rate Cut

(RTTNews) - Eurozone inflation softened to a three-month low in February, while underlying price pressures remained high, strengthening the chances of the European Central Bank delaying its first interest rate cut.

The harmonized index of consumer prices, or HICP, rose 2.6 percent annually after rising 2.8 percent in January, flash data from Eurostat showed on Friday.

Economists had expected the headline inflation figure to slow to 2.5 percent.

Core inflation that excludes energy, food, alcohol and tobacco eased to 3.1 percent from 3.3 percent a month ago. However, this was above economists' forecast of 2.9 percent.

Most policymakers of the European Central Bank have stuck to the view that they need more time to be convinced that inflation will fall sustainably to 2 percent, Capital Economics' economist Jack Allen-Reynolds said.

February's inflation data will have strengthened that conviction, the economist added. An interest rate cut in April, as earlier priced in, is now not going to happen, he added.

On a monthly basis, the HICP gained 0.6 percent in February. Final data is due on March 18.

Among components of the HICP, food, alcohol and tobacco prices increased the most, up by 4.0 percent but slower than the 5.6 percent rise in January.

Services cost rose 3.9 percent after a 4.0 percent gain.

The decline in energy prices slowed to 3.7 percent from 6.1 percent. Non-energy industrial goods prices moved up 1.6 percent, following a 2.0 percent rise.

Elsewhere, data showed that the unemployment rate in the currency bloc fell to 6.4 percent in January from 6.5 percent in December.

The number of unemployed declined by 34,000 from December. Compared to the same period last year, unemployment fell 232,000.

The unemployment rate among youth remained unchanged at 14.5 percent in January.