Two women hold an umbrella while sitting at an outdoor table at a cafe on April 01, 2024 in Rome, Italy.
Emmanuel Cremachi | Getty Images News | Getty Images
Inflation in the 20-nation euro zone fell to 2.4% in March, according to preliminary figures published by the European Union's statistics agency on Wednesday, boosting expectations for the start of interest rate cuts in the summer.
Economists polled by Reuters had expected the rate to stabilize compared to the previous month at 2.6 percent.
Core inflation, excluding energy, food, alcohol and tobacco, fell from 3.1% to 2.9%, also below expectations.
However, inflation in services – the ECB's main monitor – remained stuck at 4% for the fifth straight month, indicating continued pressure from wage growth.
Another ECB indicator released on Wednesday, the eurozone unemployment rate, stood at 6.5% in February, stable compared to January but down from 6.6% in February 2023.
Price increases in France and Spain were less than expected last week. On Tuesday, headline inflation in Germany, the bloc's largest economy, was estimated at a three-year low of 2.2%.
Markets expect the euro zone's central bank to start cutting borrowing costs in June – a position reflected in recent messages from ECB policymakers. They are scheduled to hold a monetary policy meeting on April 11.
Even Austrian Central Bank President Robert Holzmann, an ECB hawk who has previously said no cuts at all in 2024, told Reuters this week he had “no objection in principle to easing in June.”
“The current narrative clearly points to a first rate cut in June,” Carsten Brzeski, global head of macroeconomics at ING, said in a note on Wednesday. He said this was due to the March inflation reading as well as data on wage growth and ECB staff forecasts on GDP and inflation that would be released by then.
Kamil Kovar, chief economist at Moody's Analytics, said Wednesday's release “poured cold water on the idea that the last mile in beating inflation will be the hardest,” and reiterated the call for five interest rate cuts this year.
“Inflation has fallen despite the jump in energy price inflation, and the support it received early at Easter. Even if the good headline number hides some less positive details, such as upcoming services while food prices have fallen, inflation overall Still on track to decline “Less than 2% at some point over the summer,” Kovar said.
