What's going on?

Inflation in the eurozone dipped to its lowest level since 2016 in February � a sign that the continuing �euroboom� isn�t showing up in the costs of everyday living.

What does this mean?

While the data was in line with economists� expectations, prices only grew by 1.2% in the year to February, down from a 1.3% annual increase last month. �Core� inflation, which strips out more volatile prices like food and energy, only increased by a tepid 1% (compare those numbers to the European Central Bank�s (ECB) target of around 2% inflation for a healthy economy).


It�s a bit puzzling, since economic growth in the eurozone is at a ten-year high, and usually higher economic growth implies higher inflation. While it�s possible that something is changing in the global economy, many, like ECB President Mario Draghi, believe that inflation will eventually start picking up.

Why should I care?

For markets: Yields of major European bonds dropped on the news.

Put simply, bond yields have been going up over the last two months, partly because investors expect higher inflation in the near future � and the ECB to increasingly pare back its policies aimed at keeping interest rates low. But with such anemic inflation data, some are struggling to see European interest rates increasing in the near future � and that�s probably why yields of major eurozone bonds dropped on Wednesday.

For you personally: Low inflation can be a double-edged sword.

Whether or not low inflation is good or bad for you depends on whether you�ve got a lot of savings or a lot of debt. If you�ve got a lot of cash stored away in a bank account, for example, lower inflation means that the purchasing power of that money isn�t being eroded as much, since the prices of goods are only increasing mildly. On the other hand, higher inflation would likely mean you�d get a pay raise more quickly, making it easier to pay off any debt.