Source: AFP
The euro zone’s annual inflation rate fell more than forecast in March, official data showed on Wednesday, fueling hopes that the European Central Bank will cut interest rates in June.
Consumer price increases in the single currency zone slowed to 2.4%, from 2.6% in February, the EU statistics office said.
Analysts polled by FactSet had expected inflation to hold steady at 2.6 percent, while economists polled by Bloomberg had expected a smaller drop to 2.5 percent.
The rate is inching closer to the ECB’s two percent target, which will strengthen the case for a rate cut in June, but analysts do not expect a cut at the next monetary policy meeting on April 11.
The Frankfurt-based institution has kept rates steady since October 2023 after an aggressive rate hike campaign to tame rising inflation.
Inflation in the Eurozone has fallen significantly from a peak of 10.6% reached in October 2022 following Russia’s invasion of Ukraine and the resulting impact on energy costs in Europe.
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Core inflation, which strips out volatile energy, food, alcohol and tobacco prices and is a key gauge for the ECB, also fell more than expected to 2.9% in March from 3.1% in February .
Analysts at Bloomberg and FactSet had expected core inflation to drop less to 3.0 percent.
“The fall in both headline and core inflation in March suggests that the ECB is very likely to start cutting interest rates in June,” said Andrew Kenningham of London-based consultancy Capital Economics.
“While core inflation has eased, the stubbornness of services inflation and the ECB’s desire for more wage data makes a rate cut in April unlikely,” said Rory Fennessy, senior economist at Oxford Economics.
Eurozone energy prices also fell, but last month’s 1.8% fall was much smaller than the 3.7% fall in February.
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Block-wide slowdown
Across the European Union, Lithuania recorded the lowest inflation rate in March, at 0.3%, according to Eurostat data.
Source: AFP
There was also a welcome slowdown in consumer price increases in the EU’s two economic powerhouses, France and Germany.
Germany recorded an annual inflation rate of 2.3% in March, down from 2.7% in February.
In France, the inflation reading for March was 2.4%, much lower than the 3.2% recorded the previous month.
Other Eurostat data released on Wednesday showed the unemployment rate in the single currency zone was steady at 6.5% in February, the same rate as in January.
Earlier data had put the jobless rate at 6.4 percent in January, but the agency revised that figure in Wednesday’s announcement.
Source: AFP