Inflation eases to 2.4% in Europe, supporting likely central bank rate
cut
[March 03, 2025] By
DAVID McHUGH
FRANKFURT, Germany (AP) Inflation in Europe eased to an annual 2.4% in
February, supporting the case for another interest rate cut from the
European Central Bank but leaving open how far the central bank will go
in lowering borrowing costs for an economy that's still struggling to
show robust growth.
The February figure for the 20 countries that use the euro currency was
down from 2.5% in January as energy inflation dwindled and major economy
France saw a rate of only 0.9%, the European Union's statistical agency
Eurostat reported Monday.
The lower consumer price inflation figure supports the view that the ECB
is succeeding in its battle to get inflation back to its target of 2%
and can focus on supporting tepid growth. The bank's rate-setting
council is expected to cut its benchmark rate by a quarter point to 2.5%
on Thursday. That rate influences borrowing costs throughout the
economy, and a cut will make it easier to borrow money to buy a house or
expand a factory.
A rate cut Thursday had already been pencilled in by analysts but the
newr figure gives added support for a cut.
Growth worries have come to the fore after the eurozone stagnated in the
last three months of 2024, as consumers still smarting from an outbreak
of inflation remained cautious in their spending habits. Business
worried about possible new tariffs on exports to the US under President
Donald Trump. Political paralysis in France, where no party has a
majority in parliament to address an outsized budget deficit, and the
transition to a new government in Germany after the Feb. 23 national
election have also left businesses uncertain about the future.
Recent surveys of purchasing managers by S&P Global suggested the
eurozone economy just barely grew in February.
[to top of second column] |
The European Central Bank is pictured in Frankfurt, Germany,
Wednesday, Jan. 24, 2024. (AP Photo/Michael Probst, File)
 The big question at Thursday's
interest rate meeting is whether bank President Christine Lagarde
will drop clues about how far the bank will go in cutting rates.
While inflation is well down from its peak of 10.6% in October,
2022, some indicators of prices pressures remain elevated. Costs for
services a broad category ranging from haircuts and hotel rooms to
concert tickets and medical care remained at 3.7%
At its last meeting on Jan. 30, the bank said the benchmark rate was
still high enough to restrict growth; dropping that mention on
Thursday could be seen as a signal that future cuts will be more
limited.
A top ECB official argued in a recent speech that recent changes in
the economy may constrain how far the bank can go in cutting rates.
Recent evidence suggests that the era during which risks to
inflation have persistently been to the downside is likely to have
come to an end, said Isabel Schnabel, a member of the six-member
executive board that runs the bank day to day at its Frankfurt
headquarters. Schnabel argued that the so-called neutral rate at
which the economy is neither held back nor stimulated has risen in
recent years.
All contents © copyright 2025 Associated Press. All rights reserved
 |
