“Preliminary inflation readings for March were up 2.4% year-on-year, down 0.2% from last month's reading. Economists had expected inflation to be flat month-on-month, so today's numbers came as a positive surprise. Michael Field, European market strategist at Morningstar, said that with inflation moving slightly closer to the ECB's 2% target level, investors should be more confident that a rate cut is on the horizon. ” he said.
The core inflation rate, which measures prices excluding energy and food costs, also fell to 2.9% from the previous year. In February, it was 3.1%.
The biggest contributors to euro area inflation in March were services (+4%, stable compared to February), followed by food, alcohol and tobacco (+2.7% y/y, down m/m), and non-energy industrial products (+2.7% y/y, down m/m). Energy (-1.1%) and Energy (-1.8%), according to Eurostat estimates.
Natasha May, global market analyst at JPMorgan Asset Management, said: “Services inflation, the largest component of the eurozone inflation basket, appears to be stuck at 4% year-on-year, which is below the ECB's target of 2. %, which is much higher than that.”
“These prices are primarily driven by domestic labor costs, and domestic labor costs remain high due to strong wage growth and declining labor productivity. There was some news as well: core goods inflation continues to slow due to historical commodity price declines and smoother supply chains, and food prices remain decelerated.However, sustained deflation in inflation continues. Therefore, relying on volatile commodity prices is risky.The underlying price pressure is driven by the labor market.''
Will the ECB cut interest rates on April 11th?
The European Central Bank will meet on April 11, but there are no plans to change monetary policy.
“While a positive move, today's numbers could have a significant impact on the decision to cut interest rates, with 90% of economists surveyed in a recent Reuters poll expecting the first rate cut in June. gender is low.” “This likelihood is only likely to change if there are significant changes in current and subsequent economic data,” Field said.
“The ECB expects inflation to fall to 2.3% by the end of the year and reach the 2% target by the end of 2025. Therefore, March's 2.4% figure is actually “This would suggest that we are exceeding our targets.”
“Furthermore, core inflation, which strips out volatile factors such as food and fuel, also fell by 2.9% over the same period, down from 0.2%. While this was slightly worse than expected, at least it is still on the right track. The closer this number gets to the sacred 2% level, the more confident central banks will be that inflation is properly and truly under control.”
JP AM's May emphasized the importance of wage data. “The ECB has given strong indications that the first interest rate cut will occur in June. Further evidence of a decline in wage growth and therefore services inflation will therefore be required to meet this guidance. . Otherwise, the market may end up being disappointed,'' she concluded.
