Eurozone inflation falls for second month running
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The news: Eurozone inflation has fallen for the second consecutive month to 2.2%, building hopes that the European Central Bank (ECB) will cut rates later this month.
The numbers: Monday’s reading fell below February’s figure of 2.3% in the 20 European nations, as services inflation fell to its lowest in almost three years at 3.4% down from 3.7% the month prior. Energy prices also dropped to -0.7% from 0.2% in February.
Core inflation, which strips out food and fuel prices, eased to 2.4% from 2.6% the month prior.
While the figure remains above the ECB’s medium-term inflation target of 2%, rate-setters believe a rise in headline inflation in the previous months was temporary.
The context: The ECB has cut rates six times since June 2024, and investors are forecasting another reduction when the central bank meets again on 17 April. After the data was released, markets continued to price in a probability of around 75% of another quarter-point cut at the upcoming meeting, according to levels implied by swaps markets.
While the ECB had previously signalled that it could slow the pace of rate cuts as the global trade war launched by US President Donald Trump continues to add uncertainty across markets, the favourable inflation data could tilt the ECB toward cutting again.
European countries are likely to be caught in the crosshairs when Trump unveils his ‘Liberation Day’ tariffs on Wednesday, on top of the already announced steel and aluminium and auto tariffs, Trump said in February the EU bloc had been “formed to screw the United States.”
The sources: Eurostat, Financial Times
