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Eurozone inflation falls in February, posing problem for ECB

Eurozone inflation slipped to 1.1% in February from 1.3% in January, lower than the previous estimate of 1.2% and further complicating calculations for the European Central Bank as it moves toward withdrawing extraordinary monetary stimulus.

Core annual inflation, which excludes energy, food, alcohol and tobacco, was steady from January at 1.0%, final data from Eurostat showed. Consumer prices rose 0.2% in February on a monthly basis.

The fall in inflation comes after the ECB dropped a pledge to buy more bonds if necessary under its quantitative easing program from its policy guidance March 8, in a step toward normalizing historically loose monetary policy. With inflation still far from its 2% target, ECB President Mario Draghi said March 14 that any any adjustment to policy would be predictable and made at a measured pace. The euro gained less than 0.2% shortly after the news at 10:29 a.m. in London to $1.2323.

The services sector was the biggest contributor toward annual inflation in the bloc, followed by food, alcohol and tobacco, energy and nonindustrial goods.

Among the member states of the euro area, annual inflation was the lowest in Greece and Italy, at 0.4% and 0.5%, respectively, in February. Meanwhile, Estonia and Lithuania saw the highest inflation rates in February, at 3.2% each.