Two women hold an umbrella while sitting at an outdoor table of a cafe on April 1, 2024 in Rome, Italy.
Emanuele Cremaschi | Getty Images News | Getty Images
Inflation in the 20-nation euro zone fell to 2.4% in March, according to flash figures released on Wednesday by the European Union statistics agency, raising expectations for interest rate cuts in the summer.
Economists polled by Reuters had forecast the rate would remain stable at 2.6% from the previous month.
The core inflation rate excluding energy, food, alcohol and tobacco fell from 3.1% to 2.9%, also falling short of expectations.
However, inflation in the services sector – a key monitor for the European Central Bank – remained at 4% for the fifth straight month, indicating continued pressure from wage growth.
Another ECB indicator released on Wednesday, the euro area unemployment rate, was 6.5% in February, stable compared to January but below the 6.6% in February 2023.
Price increases in France and Spain last week were lower than forecast. On Tuesday, headline inflation in the bloc’s largest economy, Germany, was estimated at its lowest level in three years at 2.2%.
Markets expect the euro zone central bank to begin cutting borrowing costs in June – a position reflected in recent communications from ECB policymakers. Their next monetary policy meeting is scheduled for April 11.
Even Austrian central bank chief Robert Holzmann, an ECB hawk who had previously said it was possible there would be no rate cuts at all in 2024, told Reuters this week that he had “no fundamental objections to easing in June.” .
“The current narrative clearly points to a first rate cut in June,” Carsten Brzeski, global head of macro at ING, said in a note on Wednesday. This was due to the inflation data from March as well as the wage growth data published by then and the ECB staff’s forecasts for gross domestic product and inflation, he said.
Kamil Kovar, senior economist at Moody’s Analytics, said Wednesday’s release “shattered the idea that the last mile to combat inflation will be the hardest,” and reiterated calls for five rate cuts this year.
“Inflation has fallen despite a jump in energy inflation and a boost from early Easter. Even though the good headlines have obscured some less favorable details, such as services performing well while food prices collapse, overall inflation is still on track to fall below 2% sometime in the summer,” Kovar said.
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2024-04-03 11:59:36
www.cnbc.com
