High fuel prices in France and Spain cast a shadow over the ECB’s hopes for an early interest rate cut. writes about this Finance Times.
Inflation in France slowed from 3.4% in January to 3.1% in February, falling below the 3% forecast. This was facilitated by the slowdown in the growth of prices for food and manufactured goods. However, the acceleration of fuel price growth to 7.2% year-on-year partially offset the decline in the cost of electricity in Spain; inflation here reached 2.9% in February, after 3% in January.
This data gives hope for a quick rate cut from the ECB, which is currently at a record low of 4%. Analysts at Goldman Sachs believe the regulator could cut its 2023 inflation forecast in the eurozone to 2.3% from 2.7%.
Inflation is expected to slow further, but wage growth will remain high and increase inflation, according to European Central Bank president Christine Lagarde.
This situation is reminiscent of the 1970s, when oil shocks led to high inflation in developed countries. The newspaper writes that high gasoline and diesel fuel prices affect consumer demand and may lead to a recession in EU countries.
Governments of European countries are trying to fight inflation; In Germany, benefits for public transport were introduced, and in France, the increase in tariffs for housing and communal services remained limited. However, so far these measures have not brought concrete results in reducing inflation.
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