The market will be keeping an eye on the Eurozone inflation statistics, which are scheduled to be released by Eurostat on Wednesday 3 April at 11am CET. The data release comes after the European Central Bank (ECB) lowered its inflation outlook at its March meeting, so investors are hopeful. First rate cut in June.
Economists' forecasts are mixed. “The consensus is that eurozone inflation will fall to 2.5% in March, a modest but further decline from 2.6% in the previous month,” said Michael Field, European stock market strategist at Morningstar. Stated.
According to Goldman Sachs, the euro area's inflation measure, the Harmonized Index of Consumer Prices (HICP), is expected to rise 2.66% year-on-year in March, up from 2.59% in February. The core inflation rate (composite inflation rate excluding energy, food, alcohol, and tobacco) remains unchanged at 3.10% annually.
Investment bank Nomura expects headline HICP inflation to be flat (2.6%) in March, with core inflation expected to fall to 2.9%.
Services (+1.73 percentage points) contributed the most to the euro area annual inflation rate in February, followed by food, alcohol and tobacco (+0.79 percentage points), non-energy industrial products (+0.42 percentage points), and It became energy. (-0.36 pp).
Will Easter impact euro area inflation data?
“There is significant uncertainty in this forecast given the early timing of Easter,” Goldman Sachs said in a note. However, the euro area core inflation rate is expected to decline to an annual rate of 2.4% by December 2024.
According to Nomura, the upside risk due to Easter being earlier than last year is being overestimated this year, because “Easter is exactly at the end of March, so it is unlikely to be captured by price surveys normally conducted in mid-March. ” of the month. They also expect electricity prices to “generally decline across euro area countries.” However, fuel prices across the euro area are likely to rise. ”
Will the ECB cut interest rates by June?
Christine Lagarde said the ECB would not be able to commit to a path to cut rates, with most economists expecting the first rate cut to come in June when more data on the wage slowdown is available. but, financial times Piero Cipollone, the new ECB director, “warned against 'over-concentration' on waiting for wage growth to slow,” the report said, adding that he will advocate for rate cuts at the central bank's next board meeting on April 11. may be prepared to do so.
“The ECB appears to be leaning toward lowering official interest rates in June,” said Mauro Valle, head of fixed income at Generali Investments. “Given the weak macroeconomic environment, there are conditions to consider an early start in April, but the ECB would like to take more time to ensure that future inflation data does not show any negative surprises. I want it.”
“The last mile is always the most difficult, and investors who thought the path to 2% from here would be easy are in for a disappointment,” added Morningstar analyst Michael Field. The ECB expects inflation to fall to 2.3% by the end of the year, so a 10 basis point decline in March would be a welcome development. ”
