Eurozone consumer and core inflation slowed in March, increasing the likelihood that the European Central Bank will cut interest rates in June, ending the aggressive tightening cycle seen in the past few years. It will come to an end.
Eurostat's preliminary data on Wednesday showed the harmonized index of consumer prices rose at an annual rate of 2.4%, slower than the 2.6% rise in February. Prices were expected to rise by 2.5%.
Similarly, core inflation, which excludes volatile food and energy prices, fell more than expected to 2.9% in March from 3.1% the previous month. The percentage was estimated to be 3.0%.
The ECB kept its key refinancing rate (REFI) unchanged at 4.50% last month, but comments from policymakers, including ECB President Lagarde, suggest the ECB is preparing to cut rates in June. .
ECB staff expect inflation to average 2.3% this year, 2.0% in 2025 and 1.9% in 2026.
ING economist Bert Koline said the data at first glance seemed to open the door to a rate cut in April, but the ECB was unlikely to act this month.
The economist said the ECB was in no hurry to cut interest rates this month because the economy was not in recession and unemployment was at an all-time low. “We think June will be the time for the ECB to start cautiously cutting interest rates,” the economist added.
Among the major components, services recorded the highest annual growth rate in March, increasing by 4.0%. Food, alcohol and tobacco prices rose by 2.7%, while non-energy industrial product prices rose by 1.1%. Meanwhile, energy prices fell by 1.8%.
Separately, Eurostat announced that the currency bloc's unemployment rate stood at 6.5% in February, unchanged from January. The rate was 6.4%.
Approximately 2,319,000 young people under the age of 25 were unemployed in February. The youth unemployment rate remained unchanged at 14.6%.
Written by Renju Jaya
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