🇪🇺Cable FX Macro Weekly Note: EU Mar. Flash CPI

**As seen in Risk In The Week report 03/24/23, subscribe at cablefxm.co.uk/reports

European February inflation showed a final revised figure of 8.5%, this was in line with estimates and showed easing from the prior 8.6% Y/y. The headline has slowed for the fourth consecutive month, while food continues to be the largest contribution to the metric, it now stands at 2.87% points of the rise vs the prior 2.71%. The energy contribution declined to 1.80% points from the prior 2.14%, transport fell to contribute only with 0.84% points of the headline. On a monthly basis, energy posted a decline of 1.1%, while the headline and core came in at 0.8%, food prices advanced by 1.7% M/m. The core figure continues to accelerate in February, the Y/y came in to set a fresh record of 5.6% vs the prior 5.3%, we are yet to see prices decelerating here. After the release, the desk at Commerzbank said it would be certain to get a 50bps rate hike from the ECB in March, which was delivered a couple of weeks after. They see the core metric peaking in July and slowing gradually from there, however, they warned that as wages get re-negotiated, a new wave of inflation could kick in and affect services prices in particular. Analysts at BMO pencilled a rate hike of the same magnitude to be delivered by May as the ECB is challenged by high underlying inflation and a tight labour market, they added that the February core inflation data would silence the less-hawkish camp at the central bank. Economists at ING remind us that financial stability is not the only problem facing the ECB, they say that the decision to act in March and lift rates by the 50bps pace is a sign of the central bank willingness to drive inflation lower and deliver on its price stability mandate.