2018.02.2823:04:00UTC+00Eurozone Inflation Drops in February, Highlights ECB Caution

Eurozone inflation fell to a 14-month low in February, which highlights the European Central Bank's caution in removing stimulus despite growth surpassing expectations and the bloc's economy appearing to be on its best shape in a decade.

Official figures from the EU's statistics agency Eurostat showed the headline year on year inflation rate dropped from 1.3 percent to 1.2 percent in February, its weakest level since December 2016.

A closely watched measure of underlying inflation which excludes volatile energy and unprocessed food prices remained steady at 1.2 percent.

Inflation in services and non-energy industrial goods actually rose over the period, and Pantheon Macroeconomics' Claus Vistesen suggested “only unfavourable rounding kept the core rate from nudging higher to 1.1 percent”.

Energy prices in particular have been driving a decline in headline inflation rate for several months, while February's figure was also affected by a sharp pull-back in food price inflation

Hoping to raise inflation back to target after years of misses, the ECB has purchased more than 2 trillion euros ($2.45 trillion) worth of bonds in the past three years to boost investment and consumption.

Policymakers have warned that a stronger euro could threaten the ECB's medium-term goal of keeping inflation below, but close to, 2 percent, but despite the currency's impressive recent gains against the dollar, it has remained fairly stable on a trade-weighted basis over the last six months.

The data had little immediate impact on the euro, which was down around 0.15 percent against the dollar at publication time.