Comment by Ulrike Karstens, DWS

The inflation rate in the Eurozone disappointed in February 2023. Contrary to market expectations, it only fell to 8.5% in February, down from 8.6 per cent in January. While energy prices provided some relief for the third month in a row, food prices continued to climb. While the European Central Bank (ECB) cannot directly influence food prices, it is precisely these that lead to an increase in perceived inflation for consumers.

The ECB cannot ignore this. Furthermore, the core rate surged substantially to 5.6%, as service prices in particular rose strongly. We do not expect a real relaxation in the core rate this year, as companies will continue to pass on their higher costs to consumers. With our forecast of a core rate of 4.9% on average for the year, there is still a lot for the ECB to do. Even after the March meeting, further strong rate hikes are to be expected in order to rein in the inflation problem.