The Eurozone Harmonized Index of Consumer Prices (HICP) rose 2.4% year-on-year in March, lower than the 2.6% forecast for the same month.
Growth this year fell from 2.6% in February, but the European Central Bank maintained its 2% inflation target. Core HICP, which excludes energy, food, alcohol and tobacco, was 2.9% year-on-year in March, down from 3.1% in February.
Inflation is below expected levels after proving sticky, but Michael Field, European field strategist at Morningstar, said the numbers were a “positive surprise” and investors would be pushing for a rate cut. Stated.
“The ECB expects inflation to fall to 2.3% by the end of the year and reach the 2% target in 2025, so March's 2.4% figure is “This would suggest that we are actually exceeding our target.”
“The closer this number approaches the sacred 2% level, the more confident the central bank will be that inflation is properly and truly under control.”
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Mr Field added: “Although this is a positive development, today's numbers are a significant factor in the decision to cut interest rates, given that 90% of economists surveyed in a recent Reuters poll expected the first rate cut in June. It is unlikely to have any impact,” he added. Only major changes in current and subsequent economic data can change this possibility. ”
Natasha May, global market analyst at JPMorgan Asset Management, also pointed out that the cuts are necessary as wage growth slows and leads to service inflation levels, adding that the cuts will not be excessive based on March levels. The excitement rang an alarm.
“Today's euro zone inflation announcement will bring a sigh of relief to the ECB as headline and core inflation have fallen again. However, a superficial look at the March inflation figures suggests that the central bank's board “This suggests we should not pop the champagne cork yet,” Prime Minister Theresa May said.
“Services inflation, the largest component of the euro area inflation basket, appears to be stuck at 4% year-on-year, well above the ECB's 2% target. These prices are largely driven by domestic labor costs. Domestic labor costs remain high due to strong wage growth and declining labor productivity.
“Of course, there was some good news in today's paper. Historically lower commodity prices and smoother supply chains mean that core goods inflation continues to slow and food prices remain decelerated. Relying on volatile commodity prices to eliminate inflation is risky.The underlying price pressure is driven by the labor market.
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Services have not yet been eased, but Daniele Antonucci, chief investment officer at Quintet Private Bank, believes a slowdown in non-industrial products and food will create room for cuts.
“Additionally, the labor market remains resilient and the pace of economic growth will remain weak in the short term, although there are tentative signs that the economy may bottom out,” Antonucci said. It's very likely.”
“This is why we think central banks have room to cut. Inflation is probably slowing unevenly, but it is actually slowing, and growth is weaker and perhaps even weaker than previous recession expectations. Although the market is holding up well, it remains in a slump.”
