The eurozone's annual inflation rate fell further than expected in March, official figures showed on Wednesday, raising hopes that the European Central Bank would cut interest rates in June.
Consumer price inflation in the single currency area slowed to 2.4% from 2.6% in February, the EU Statistics Office said.
Analysts surveyed by FactSet had expected inflation to hold steady at 2.6%, while economists asked by Bloomberg expected it to fall to 2.5%.
The figure is close to the ECB's 2% target and would strengthen the case for a June rate cut, but analysts do not expect a rate cut at the next monetary policy meeting on April 11. .
The Frankfurt-based bank has kept interest rates on hold since October 2023 after an aggressive rate hike campaign to stem soaring inflation.
Eurozone inflation has fallen sharply from its peak of 10.6% in October 2022, following Russia's invasion of Ukraine, which had a major impact on Europe's energy costs.
Core inflation, which subtracts volatile energy, food, alcohol and tobacco prices – the ECB's key indicator – also fell further than expected, to 2.9% in March from 3.1% in February. .
Analysts at Bloomberg and FactSet had expected core inflation to fall to 3.0%.
“The decline in both headline and core inflation in March means it is very likely that the ECB will start cutting interest rates in June,” said Andrew Kenningham of London-based consultancy Capital Economics. It suggests that.”
“While today's indicators are certainly encouraging, the ECB is in no hurry to cut rates this month,” said Bert Kollaine, senior euro zone economist at ING Bank. “There is,” he said.
Last month, ECB President Christine Lagarde said she believed April's interest rate cut was premature and that the ECB would be able to make a more informed decision later.
“We'll know a little bit more in April, but we'll know a lot more in June,” she said.
～The “difficult” last mile～
Energy prices in the euro area also fell, but last month's 1.8% drop was much smaller than the 3.7% drop in February.
“We continue to move closer to our inflation target in small steps,” said Fritzi Köhler Geib, chief economist at German bank KfW.
“The last mile remains a challenge. The decline in energy prices, which has had a strong restraining effect in recent months, is gradually breaking down,” he added.
Lithuania had the lowest inflation rate in the entire European Union at 0.3% in March, according to Eurostat data.
France and Germany, the EU's two largest economies, also saw a welcome slowdown in consumer price growth.
Germany's annual inflation rate was 2.3% in March, down from 2.7% in February.
In France, inflation was 2.4% in March, significantly lower than the 3.2% recorded the previous month.
Other Eurostat data released on Wednesday showed the single currency area's unemployment rate remained stable at 6.5% in February, the same as in January.
Previous data had put the unemployment rate in January at 6.4%, but authorities revised that figure in Wednesday's release.
