The reading will reinforce the view of those within the ECB who have said it’s too early to begin discussing rate cuts. Austrian National Bank Governor Robert Holzmann told POLITICO this week that no such discussion is likely before June.

Growth in service prices, where wage pressures are typically easier to spot, slowed marginally to 3.9 percent, corroborating earlier data from some of the bloc’s biggest member states.

“Those services prices are sticky, now responsible for half of headline inflation, which will make the ECB uncomfortable,” Pepijn Bergsen, EU macro policy analyst at Medley Advisors, wrote on X.

Headline inflation is expected to be bumpy throughout the early part of 2024, with large base effects tending to exaggerate the underlying trend of a return to stability. Pay negotiations and their effects on prices are also a key factor, with workers seeking to recover lost purchasing power after two years in which wages have failed to keep pace with prices.

Top policymakers have put great emphasis on developments in wages, hoping for a moderation in pay rises and for evidence that firms are absorbing higher labor costs in their profit margins, rather than passing them on to consumers.

The ECB expects inflation to hover around 2.7 percent in 2024 and only reach its target in the second half of next year. However, it has said it is likely to revise these projections down at its meeting next week, and senior economists at the bank published a research paper earlier this week suggesting that it may hit the target as early as the middle of this year.

Eurozone employment data, released simultaneously, showed that the labor market is still reasonably healthy. The seasonally adjusted unemployment rate fell back to its record low of 6.4 percent in January, from 6.5 in December and 6.6 percent a year ago.

While the job market showed resilience in the face of the fastest increase in borrowing costs on record, the economy has been stagnant ever since the ECB began raising interest rates in July 2022. The eurozone just about avoided recession at the end of last year, but successive quarters of little or no growth have raised worries that the high cost money will impede any nascent recovery.

On Friday, survey data from S&P Global indicated the eurozone manufacturing sector was still contracting in February, although its headline index suggests that the sector bottomed out toward the end of last year.