Inflation in Europe Better than Expected

Prices decrease more than projected, interest rates are now expected to fall, possibly in June

Eurozone inflation is falling more than projected and is expected to be 2.4% year-on-year in March 2024, down from 2.6% in February. This is what Eurostat explains in the preliminary estimates.

“Looking at the main components of eurozone inflation, the highest annual rate in March is expected to be in services (4.0%, stable compared to February), followed by food, alcohol and tobacco (2.7% compared to 3.9% in February), non-energy industrial goods (1.1% compared to 1.6% in February), and energy (–1.8% compared to –3.7% in February),” the European Statistical Institute said in a statement.

Country-specific data was released earlier: inflation in Germany fell to 2.3% in March from 2.7% in the previous month and is expected to reach 2% as early as next month. In France, we are at 2.4% from 3.2% in February, while in Italy, the cost of living rose, but less than expected, reaching 1.3% from 0.8% in February. Only Spain’s data reversed this trend, recording a 3.2% increase in March.

Given the clear trend toward 2%, which is the European Central Bank’s stated target, the first rate cut after months of increases is expected, which could stimulate the sluggish European economy. According to a report in the Italian newspaper Milano Finanza, “markets estimate a 15% chance of a cut in April, although they are surely anticipating an intervention by June, for a total of four cuts this year.”