The European Central Bank (ECB) is monitoring inflation and deciding when to reduce interest rates. While recent data shows inflation is declining, they will gather more economic information, especially on wages, in April and June. The ECB wants to ensure workers' earnings improve, but also that companies absorb some of the costs to prevent excessive profit taking. Ultimately, the ECB aims to bring inflation back to their target in a sustainable and timely manner.
Inflation in the European Union declined slightly in February to 2.6%, but remains higher than anticipated, with core inflation also above expectations. The European Central Bank faces challenges in balancing inflation control with economic growth concerns, as core inflation persists above 3%. Wage negotiations in the spring and price increases driven by the Russian invasion of Ukraine will influence the ECB's decision on adjusting interest rates.
