FX.co ★ Italy’s 10-Year BTP Yield Falls as Inflation Cools

Italy's 10-year BTP yield continued its downward trend, dipping further below 3.5%, as markets absorbed softer inflation figures from the eurozone in advance of the European Central Bank's (ECB) upcoming meeting on Thursday. In January, the eurozone Consumer Price Index (CPI) decreased to 1.7%, comfortably under the ECB's target, while core inflation unexpectedly dropped to 2.2%, marking the lowest level since October 2021. This development has sparked concerns that a strengthened euro might lead to the resumption of interest rate cuts, which had been paused since June. Within Italy, inflation slowed to 1.0%, reaching its lowest point since October 2024. The ECB is broadly anticipated to maintain interest rates unchanged for a fifth consecutive meeting, as officials consider the deflationary effects of a stronger euro. ECB President Christine Lagarde is likely to reiterate that monetary policy remains stable, while money markets project that interest rates will remain steady through 2026.