Irish inflation falls to second lowest in euro area at 1.4%

The euro area annual inflation rate fell marginally to 2.3% in February, coming in closer to the European Central Bank's (ECB) target of 2%.

Underlying inflation, or prices excluding volatile food and energy costs, a figure closely watched by policymakers, was left unchanged at 2.6%, while the monthly growth rate was cut to 0.5% from 0.6%.

Irish inflation as measured by Eurostat came in lower than figures from the Central Statistics Office (CSO), which measured inflation to be 1.8% in February. 

The difference is down to mortgage repayments, which the CSO counts in its inflation figures, while Eurostat does not, leading to a lower figure.

Compared to January, annual inflation fell in fourteen Member States, remained stable in six and rose in seven.

The highest annual rates in the EU were recorded in Hungary, where inflation rose by 5.7%, Romania, up 5.2% and Estonia, which rose by just over 5%.

Markets now see a 50% to 60% chance of another ECB rate cut in April but have fully priced in a move by June. 

They also anticipate another cut before the end of the year, which would take the ECB's deposit rate to 2%.

However, the ECB has said that uncertainty is extremely high and would not make up its mind until it collected as much data as possible. It will also be factoring in trade tensions with the US, the burden of financing Ukraine and falling energy costs.

The ECB now sees inflation oscillating around the current level for the rest of the year before falling to its 2% target at the beginning of 2026.