Euro zone inflation March 2024


Excluding energy, food, alcohol and tobacco, the core inflation rate declined to 2.9% from 3.1%, lower than expected.

However, inflation in services – a key watchdog for the European Central Bank – remained stuck at 4% for the fifth consecutive month, pointing to continued pressure on wage growth.

The euro zone's unemployment rate, another indicator for the ECB released on Wednesday, was 6.5% in February, steady from January but down from 6.6% in February 2023.

Price increases in France and Spain were lower 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%.

The market expects the euro zone central bank to start reducing borrowing costs in June – this position is reflected in the recent message from ECB decision makers. They are next scheduled to hold a monetary policy meeting on April 11.

Even Austrian central bank chief Robert Holzmann, an ECB supporter who previously said it was possible there would be no rate cuts in 2024, told Reuters this week he was “in principle open to easing in June.” No objection.”

“The current story is clearly pointing to a first rate cut in June,” Carsten Brzeski, global head of macro at ING, said in a note on Wednesday. This, he said, is due to the March inflation print as well as wage growth data and ECB staff forecasts on GDP and inflation, which will be released by then.

Kamil Kovar, senior economist at Moody's Analytics, said Wednesday's release “cast cold water on the idea that the last mile will be the hardest to beat inflation,” and reiterated a call for five rate cuts this year.

“Inflation declined despite a surge in energy inflation and a surge from the start of Easter. Even if the good headline numbers masked some less favorable details, such as services accelerating while food prices fell “Overall inflation is still on track to dip below 2% sometime during the summer,” Kovar said.

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