Inflation persists in the euro zone despite a slight decline

FRANKFURT, Germany (AP) — Inflation eased slightly in the 20 countries that use the euro and the pressure from high food and fuel prices continued, giving the central bank no reason to scale back increases interest rates aimed at controlling prices.

The consumer price index rose to 8.5% in February from a year earlier, from 8.6% in January, the European Union’s statistical agency Eurostat said on Thursday. The figure was above analysts’ forecasts of 8.3%.

Inflation has eased since its peak of 10.6% in October, but its persistence has surprised economists. Figures for Germany, France and Spain were higher than expected this week.

Alcohol, tobacco and food prices rose 15% from an already painful 14.1% in January, even exceeding energy costs caused by Russia’s war in Ukraine. Energy prices rose 13.7% from a year earlier, but were lower than January’s 18.9% increase.

Higher prices for natural gas, which is used to heat homes, power industrial processes and generate electricity, have been a key driver of inflation across the economy. Russia cut off most of its supplies to Europe last year under pressure from governments over their support for Ukraine.

Although natural gas prices have fallen as a mild winter reduced demand for heating, it will be months before these lower prices translate into lower consumer bills. Meanwhile, rising prices have prompted workers to demand higher wages in wage negotiations, often through strikes and protests in various parts of Europe.

More alarming than the headline figure, core inflation, which excludes volatility in food and energy prices, may give a more accurate picture of whether inflation will continue to weigh on the economy. long-term. This underlying figure fell from 5.3% to 5.6%.

European Central Bank President Christine Lagarde has signaled that the bank will raise interest rates a further hefty half a percentage point at its March 16 meeting, and analysts expect more. increases in the future.

Interest rates affect the cost of borrowing and make it harder to borrow and spend, reducing demand for products.

“As long as core inflation remains stubbornly high in the eurozone, the ECB will continue to raise rates and will not consider future rate cuts,” said Carsten Brzeski, chief eurozone economist at ING. Bank.