KOF Monetary Policy Communicator for the Euro Area, March 2025

The ECB’s Governing Council continued its 2025 easing streak by lowering its three key ECB interest rates by 25 basis points. The ECB newly projects inflation to average 2.3% in 2025, 1.9% in 2026 and 2.0% in 2027. The upward revision for the running year can be tracked back to higher energy prices.

Annual HICP inflation in the euro area has edged-down to 2.4% in February, from 2.5% in January. Food price inflation picked-up to 2.7%, while goods inflation slightly increased to 0.6%. Energy price inflation came down to 0.2%, after a surge to 1.9% in January. Services inflation was recorded at 3.7%, down from previous readings that were hovering around the 4% mark over an extended period. Domestic inflation still runs high despite a decline in January. However, wage pressures have recently shown signs of easing. Most measures of longer-term inflation expectations currently stand at around 2%.