Eurozone Inflation Falls Again in March

Core
inflation,
which
shows
prices
without
energy
and
food
costs,
also
fell
to
2.9%
year
on
year.
It
was
at
3.1%
in
February.

In
March,
the
greatest
contributors
to
eurozone
inflation
were
services
(+4%,
stable
compared
to
February),
followed
by
food,
alcohol
and
tobacco
(+2.7%
year
on
year,
down
from
previous
month),
non-energy
industrial
goods
(+1.1%)
and
energy
(-1.8%),
according
to
Eurostat
estimates. 

“Services
inflation
–
the
biggest
component
in
the
eurozone
inflation
basket
–
appears
stuck
at
4%
year-on-year,
well
above
the
ECB’s
2%
target,”
said
Natasha
May, global
market
analyst
at
J.P.
Morgan
Asset
Management.

“These
prices
are
mainly
driven
by
domestic
labour
costs,
which
remain
high
thanks
to
strong
wage
growth
and
weak
labour
productivity.
Of
course,
there
was
some
good
news
in
today’s
print:
past
commodity
price
declines
and
smoother
supply
chains
mean
core
goods
inflation
continues
to
slow,
and
food
prices
are
still
decelerating.
But
relying
on
volatile
commodity
prices
for
sustainable
disinflation
is
a
risky
business
–
it’s
the
labour
market
that’s
driving
underlying
price
pressures.”

Will
the
ECB
Cut
Rates
on
April
11?

The
European
Central
Bank
will
meet
on
April
11,
but
it
is
not
expected
to
change
monetary
policy.

“While
a
positive
move,
today’s
figure
is
not
likely
to
materially
influence
any
rate
cutting
decisions,
with
a
recent
Reuters
poll
showing
that
90%
of
economists
surveyed
expect
the
first
interest
rate
cut
in
June.
Only
a
large
shift
in
economic
data
between
now
and
then
is
likely
to
alter
this
likelihood,”
said
Field.

“The
ECB
is
expecting
inflation
to
fall
to
2.3%
by
year
end,
reaching
its
2%
target
sometime
in
2025.
So,
a
2.4%
reading
for
March
would
suggest
that
we
are
in
fact
running
ahead
of
target,”
he
added.

“Additionally,
core
inflation,
which
strips
out
volatile
components
such
as
food
and
fuel,
also
showed
a
0.2%
decrease
to
2.9%
over
the
period.
Although
this
was
slightly
worse
than
expectations,
it
is
at
least
still
moving
in
the
right
direction.
The
closer
this
number
gets
to
the
hallowed
2%
level,
the
more
assurance
the
central
bank
will
have
that
inflation
is
well
and
truly
under
control.”  

J.P.
AM’s
May
stressed
the
importance
of
wage
data.
“The
ECB
has
given
a
strong
signal
that
June
will
see
the
first
rate
cut.
To
fulfil
this
guidance,
then,
more
evidence
of
cooling
wage
growth
–
and
therefore
services
inflation
–
will
be
needed.
If
not,
markets
may
end
up
disappointed,”
she
ended.

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