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Eurozone inflation fell less than forecast in February, the latest region to prompt expectations of further interest rate rises because of persistently rising prices.

Consumer price growth dipped only slightly to 8.5 per cent in the year to February, from 8.6 per cent in January, the EU statistics agency said on Thursday, compared with a forecast of 8.2 per cent. While energy price inflation slowed, price rises for services, goods and food all gained pace.

The figures will reinforce a growing belief on both sides of the Atlantic that inflation will stay uncomfortably high for too long, raising the risk of wage price spirals in the US and eurozone.

Over the past month, financial markets have priced in higher interest rates for longer after the Federal Reserve’s preferred measure of US inflation picked up in January and wage data came in strong in the US, the UK and parts of the eurozone.

Analysts said the new eurozone data indicated inflation was likely to fall more slowly for the rest of the year than expected and that the European Central Bank would keep raising rates even after an expected 0.5 percentage point rise on March 16.

“We think ECB hawks will use today’s data to call for the bank to extend its string of 50 basis point rate hikes into the second quarter,” said Melanie Debono, economist at research group Pantheon Macroeconomics.

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She suggested those arguments could be bolstered by data also released on Thursday showing the resilience of the eurozone labour market — unemployment remained at 6.7 per cent — and a new eurozone record high for core inflation.

Core inflation, which central bankers watch closely as it excludes energy and food prices to give a clearer picture of underlying pressures, rose to 5.6 per cent — up from 5.3 per cent in the previous month.

ECB president Christine Lagarde said before Thursday’s figures were released that while inflation was likely to have risen “a little bit” in February, it was on track to fall “much more” in March owing to the base effects of year-on-year comparisons with last year’s high energy prices.

Borrowing costs for eurozone governments fell after the flash estimates, indicating some investors had expected high February inflation figures. Germany’s two-year borrowing costs fell slightly to 3.18 per cent, but remain more than 50 per cent higher than in December.

Lagarde told Spanish TV station Antena 3 on Thursday that rising food prices would prevent inflation from falling in a straight line and that more rate rises may be needed after this month.

The ECB has raised rates by 3 percentage points since last summer. Financial markets are pricing in a jump in the bank’s deposit rate to 4 per cent later this year, up from 2.5 per cent. That would overtake the 2001 peak of 3.75 per cent, when the ECB was still trying to shore up the value of the newly launched euro.

When the ECB decided to continue raising rates at the start of February its governing council members agreed that “it was much too early to declare victory” in the fight to tame inflation, according to the minutes of the meeting published on Thursday.

Annual inflation rose in half the countries that make up the 20-member single currency zone, where price growth ranged from more than 20 per cent in Latvia to just below 5 per cent in Luxembourg. Inflation was higher in Germany, France and Spain.

Food, alcohol and tobacco prices in the eurozone rose 15 per cent in February, their fastest rate on record. Energy price rises slowed to 13.7 per cent, the lowest rate since June 2021.