Headline inflation in the euro area moderated by nearly two-tenths in February on a year-over-year basis, reaching 2.6%. The core rate, which excludes volatile items such as energy, food, alcohol, and tobacco, to provide a clearer measure of long-term inflation trends, fell to 3.1% from 3.3%, its lowest level in two years, according to data from Eurostat, the statistical office of the European Union.

The increase in services prices contributed the most to the euro area’s annual inflation rate, surpassing the increases in categories such as food, energy, alcohol, tobacco, and non-energy industrial goods.

The price of services continued to rise at 4%, while the cost of non-energy industrial goods remained at 1.6%. Energy costs fell by 3.7%, a smaller decline compared to the 6.1% drop in the first month of the year. Food price inflation slowed to 2.1%, a significant decrease from the 6.9% increase in January.

Inflation in the European Union as a whole was 2.8% in February, down from 3.1% in January

Annual inflation rates decreased in 20 member states, were stable in five, and rose in two. The lowest annual rates were recorded in Denmark, Latvia (both at 0.6%) and Italy (0.8%). In contrast, the highest annual rates were recorded in Romania (7.1%), Croatia (4.8%) and Estonia (4.4%).

In the major economies of the European continent, inflation fell by six-tenths in Spain to 2.9%, stood at 2.7% in Germany, 3.2% in France and 0.9% in Italy.

In its latest estimates, the European Central Bank (ECB) lowered its inflation forecasts, mainly for this year, due to a lower contribution from energy prices. For 2024, the ECB now forecasts HICP inflation at 2.3%, a reduction of four-tenths from its previous forecast, and anticipates a rate of 2% in 2025, down by one-tenth from its earlier projection. This would be four-tenths lower for this year and one-tenth lower for next year. The figure for 2026 remains unchanged at 1.9%. Similarly, core inflation is now forecast at 2.6% for 2024, 2.1% for 2025, and 2% for 2026.