EUROZONE DATA: Week Ahead: Feb Flash Inflation Readings In Focus

The Eurozone week-ahead is headlined by February flash inflation data from the four main member states, which together should give a good read on price pressures ahead of the Eurozone-wide release on Monday, March 3. Early consensus (all HICP) looks for a small deceleration in Germany (2.6% Y/Y vs 2.8% prior), an uptick in Italy (1.8% Y/Y vs 1.7% prior), and steady readings in France (1.8% Y/Y) and Spain (2.9% Y/Y). 

• The ECB has expressed confidence in headline inflation returning sustainably to the 2% target during the course of this year, underscored by an expected deceleration in services inflation on the back of easing wage growth. Services inflation has been stuck around 4% Y/Y since November 2023.
• In a generally hawkish interview with the FT this week, Executive Board member Schnabel said she expects to start seeing services inflation moderate from February. This will be the primary focus for markets heading into the releases.
• A better understanding of current underlying services price pressures will be available in the January final HICP report due Monday.
• The ECB’s Q4 negotiated wages index will be released on Tuesday. Wage metrics over the past few weeks (ECB’s forward looking wage tracker and the Indeed wage tracker) have generally supported the bank’s base case for a moderation of labour costs.
• Next week’s data is not likely to shift market pricing for the March 6 meeting, where a 25bp cut remains essentially fully priced. However, it will be important in shaping consensus for the April and June gatherings. Following the February flash PMIs, OIS price 16bps of sequential easing through April and 18bps of easing through June.