The inflation level landed lower than expected.
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The short version
- Price growth in the eurozone in March ended at 2.4% according to preliminary data from Eurostat.
- Core inflation was 2.9%, down from 3.1% the previous month.
- The service sector had the highest price growth of 4.0%, followed by alcohol and tobacco at 2.7%.
- Due to the reduced inflation, a possible interest rate cut by the European Central Bank (ESB), expected in June, is being discussed.
- According to Handelsbanken, if inflation figures continue to show a downward trend, an interest rate cut by the ECB in June is quite certain.
- The ECB expects to reach the inflation target of 2% during 2025.
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Price growth in the eurozone ended at 2.4 per cent in March, according to preliminary figures from the EU’s statistics agency Eurostat.
Core inflation came in at 2.9 per cent, down from 3.1 per cent last month. It was expected that it would moderate to 3.0 percent.
In advance, it was expected that inflation would moderate to 2.5 percent from 2.6 percent in February, according to a survey by Bloomberg.
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The service sector had the highest price increase of 4.0 per cent, and is unchanged from the previous month. This is followed by alcohol and tobacco at 2.7 per cent.
The numbers from Eurostat EurostatThe Statistical Office of the European Union (EU), which supplies statistics to the EU so that it can compare information across countries and regions. includes the 20 countries in the EU that use the euro as their currency. Croatia had the biggest price increase with its 4.9 percent on an annual basis.
Interest rate cut in June
Overall, euro inflation has moderated sharply in recent months. Price growth has thus also begun to approach the European Central Bank’s (ESB) inflation target of two per cent.
The central bank has chosen to keep the interest rate unchanged at 4 percent at the last meetings. It has been at this level since September.
The discussion surrounding the ECB’s interest rate setting has lately focused more on when the first interest rate cut will come, probably in June.
“Could have said April”
“Should the inflation figures show a new and increasingly convincing downward trend, we can consider it certain that we will receive an interest rate cut from the ECB in June,” Handelsbanken wrote in their morning report on Wednesday.
“In principle, we could say April – given a fairly weak economy, the ECB’s fingers are probably itching to lower the interest rate – but the ECB will at the same time see the wage figures for the first quarter. And they won’t arrive until May,” the report continued.
The ECB expects that the inflation target will be reached during 2025.
