The eurozone CPI falls more than expected to 2.4% and puts pressure on the ECB to lower interest rates

The eurozone CPI falls more than expected to 2.4% and puts pressure on the ECB to lower interest rates


Inflation once again brings positive news for the eurozone. The consumer price index (CPI) decelerated in March from 2.6% year-on-year to the 2.4%, according to data published this Wednesday by Eurostat. This decline is greater than expected by the consensus of economists, which estimated a minimum drop of up to 2.5%. This is the lowest reading since July 2021, which corroborates the path of disinflation experienced in the region since the peak of 10.6% in October 2022. The same has happened with the Underlying CPI (excludes more volatile categories such as energy, food, alcohol and tobacco), more persistent and the reason for greater attention in recent months: slowing from 3.1% to 2.9%, one tenth more than expected. In the case of the underlying reading, it is the lowest since February 2022. All these numbers put more pressure on the European Central Bank (ECB) to lower interest rates soon. However, it seems ruled out that the central bank will undertake this change at its April meeting and everything indicates that it will do so at the June.

The probable decline in inflation is good news for the ECB, but the rigidity of underlying services inflation and the uncertainty about high wage growth suggest that the first rate cut will not occur until June, economists at Danske Bank.

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