In the Eurozone, the Structural CPI surprised in February, rising 0.3 percentage points, more than expected, to a new record high of 5.6% year on year, signaling continued inflationary pressures on the economy as a whole. Growth was driven by higher prices for manufactured goods, but mostly by higher prices for services, reflecting to some extent higher wage growth as a result of the continued resilience of the labor market in the face of the economic downturn (according to the most recent data, the level unemployment in the euro area in January remained at 6.7% for the third month in a row, which is close to the historically low level of 6.6% in October). The core consumer price index fell for the fourth straight month, albeit less than the market expected, to 8.5% year-on-year from 8.6% in January due to lower energy prices, but remained well above the medium-term inflation target of 2% ECB.

Strong concerns about high inflation persisting longer than expected (5-year inflation swap rate of 2.58%, the highest in ten years), especially after recent positive data from the eurozone economy, suggesting that initial concerns about potential recession in the first quarter, the year is likely to be negative, which led investors to further revise upward their estimates of the path of interest rates. In particular, the futures market does not take into account the end of the ECB rate hike at the end of the year, when the deposit rate rose to almost 4% from 3.75% last week, an overall further increase of about 150 basis points. According to a December press conference by ECB President Christine Lagarde, the market expects a 50bp gain. at the next monetary policy meeting on March 16, however, it is worth noting that after the inflation data, there is now a roughly 80% chance of another increase of the same size at the next meeting on May 4. At the same time, after strong new data on the US labor market and the Structural Index of Personal Consumption Expenditure – an indicator that the Fed monitors inflation dynamics with particular attention – investors are now expecting an increase in the Fed’s key intervention rate. up 5.45% compared to 5.37% last week and 4.80% about a month ago.

* Department of financial analysis and research of international capital markets of Eurobank.