Euro zone inflation softens to 8.5% in February as ECB signals interest rate hiking is not over

Inflation in the euro zone eased slightly in the month of February, following comments from the European Central Bank chief that bringing the rate down will take some time.

Headline inflation across the 20-member bloc came in at 8.5% in February, according to preliminary data released Thursday. This indicates that prices are not coming down at the pace that had been registered in recent months. Headline inflation stood as high as 10.6% in October, but reached a revised 8.6% in January.

Analysts polled by the Wall Street Journal were expecting a lower February inflation rate of 8.2%.

Food prices increased month-on-month, offsetting declines in energy costs.

Core inflation picked up to an estimated 5.6% in February, from 5.3% in January.

In recent days, market players have been wondering whether the ECB will have to keep its hawkish stance for longer, following hotter-than-expected February inflation figures from France, Germany and Spain.

ECB President Christine Lagarde said Thursday that bringing down inflation will still take time, according to comments reported by Reuters. The bank targets a headline rate of 2%.

The Frankfurt-based institution has indicated that another 50 basis point hike is on the cards for when the central bank adjourns later this month. In comments reported by Reuters, Lagarde said Thursday that this move is still on that table, as inflation remains well above target.

Analysts at Goldman Sachs said earlier this week that they were raising rate hike expectations for the ECB and pricing in another 50 basis points hike in May.

European bond yields have been moving at multi-year highs in recent days, amid considerations that the hawkish monetary policy is here to stay.