As new eurozone inflation figures are released, Euronews looks at recent trends in eurozone inflation, including changes in key components, differences between member states and market expectations for ECB rate cuts. .
advertisementEurozone inflation fell from 2.6% to 2.4% in March 2024, the lowest level in four months, confirming preliminary data, Eurostat reported today.
The euro area consists of countries within the European Union that use the euro as their national currency.
There are various main factors that contribute to inflation. March saw the highest growth in services for the year, at just 4.0% compared to February. This was followed by food, alcohol, and tobacco at 2.7%, down from 3.9% the previous month.
Non-energy industrial products rose 1.1%, down from 1.6% in February, while energy prices fell 1.8%, a slower decline than February's -3.7% decline.
Breakdown of euro area inflation: key components
In the euro area, the inflation rate is determined by a weighted average of the Harmonized Index of Consumer Prices (HICP). However, the importance of the main factors contributing to inflation varies.
In 2024, services will account for the largest share of household expenditure in the euro area, accounting for approximately 44.9%, followed by non-energy industrial products at approximately 25.7%.
Food, alcohol, tobacco and energy accounted for 19.5% and 9.9% respectively. Despite being a small portion of spending, prices can fluctuate widely and have a large impact on overall inflation.
Differences between euro area countries
According to the European Central Bank, inflation rates can vary from country to country in the euro area due to specific events, changes in trade and consumption patterns, and differences in financial systems.
The highest annual inflation rates were in Croatia (4.9%), Austria (4.2%), Estonia (4.1%) and Belgium (3.8%), but also in Lithuania (0.3%), Finland (0.7%) and Latvia ( 1%), and Italy (1.3%) was the lowest.
Core inflation, which excludes volatile food and energy items, fell to 2.9% from 3.1% in March, the lowest level in two years.
How might this change the course of the European Central Bank?
Euronews previously reported on market expectations and the ECB's inflation forecast, highlighting the possibility of a June rate cut and reporting that four rate cuts are expected by the end of 2024.
“If our latest assessment of the inflation outlook, underlying inflation dynamics, and the strength of monetary policy spillovers provide further confidence that inflation is sustainably converging on target, we will lower current levels. ECB President Christine Lagarde said last week that she was tightening monetary policy restrictions.
Lagarde also remained neutral, postponing a decision until June when “more information” is available. He said that while “a small number of members” were prepared to cut rates in April, the consensus among members was to operate from a meeting to a meeting without making any prior commitments to any interest rate path.
The inflation figures released today will therefore be closely monitored by Ms Lagarde and her team as they consider the ECB's next monetary policy move.
