BRUSSELS, March 2 — Surging food costs dashed hopes of a steeper fall in the eurozone’s annual inflation rate in February.

Inflation was down to 8.5 per cent last month from 8.6 per cent in January, but the analyst consensus forecast compiled by financial data firm FactSet was 8.2 per cent, while that of Bloomberg was 8.3 per cent.

The eurozone’s core inflation, which excludes volatile food and energy prices, rose from 5.3 per cent in January to a new record of 5.6 per cent last month, the EU’s statistics agency Eurostat said.

The figures could see the European Central Bank (ECB) continue interest rate hikes beyond the first few months of 2023, analysts said, as it battles to control inflation.

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“For some time we have been forecasting a 50 basis point hike at the meeting in two weeks’ time and another in May, but further hikes at later meetings now look increasingly likely,” said Jack Allen-Reynolds, deputy chief eurozone economist at Capital Economics.

The annual inflation rate had been falling each month since it hit a peak of 10.6 per cent in October last year, thanks to the slowdown in energy costs rises.

Energy bills spiralled after Russia invaded Ukraine last year but a milder-than-feared winter and government support for households and businesses’ fuel costs helped Europe stave off the worst of the crisis.

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Food and drink prices rose by a new all-time high of 15 per cent last month compared with 14.1 per cent in January, according to Eurostat.

Energy cost rises fell to 13.7 per cent, compared with 18.9 per cent in January, it said.

It was the first time in two years that food costs rose more than energy but experts said they expected the food inflation rate to be slower over the course of the year.

‘Clear setback’

Inflation, however, remains much higher than the ECB’s target of 2 per cent.

ECB chief Christine Lagarde last month said the institution plans to raise its interest rates by a half per centage point at the next meeting in March.

Other Eurostat data reflecting underlying tensions will also weigh heavily on the bank.

Services prices grew by 4.8 per cent last month compared to 4.4 per cent in January, while industrial goods costs rose to 6.8 per cent from 6.7 per cent.

Among the 20 countries that use the euro, Luxembourg had the lowest inflation rate, at 4.8 per cent in February, Eurostat said.

But elsewhere in the eurozone, price pressures are proving persistent.

France’s inflation rose to 7.2 per cent while Germany’s consumer prices reached 9.3 per cent in February, according to Eurostat.

Italy’s national statistics agency Istat said inflation there dropped to 9.2 per cent last month from 10.0 per cent in January.

There were some reasons to be hopeful, ING senior eurozone economist Bert Colijn said.

“The February reading is a clear setback, but forward-looking indicators show that the declining trend in inflation is set to continue,” he said.

According to other Eurostat data published Thursday, the unemployment rate in the eurozone remained stable in January at 6.7 per cent. — AFP