Inflation Cools in Eurozone, Nearing Central Bank’s Target

Inflation Cools in Eurozone, Nearing Central Bank’s Target

The annual inflation rate fell for the third month in a row in most European economies, moving closer to the target set by the European Central Bank. Consumer prices in the 20 countries that use the euro rose 2.4 percent in the year to March, compared with 2.6 percent the previous month, the European Union reported on Wednesday.

The interest rate was slightly lower than economists expected, bringing headline inflation closer to the 2 percent target of the ECB, which will hold its next interest rate-setting meeting on April 11.

The central bank also keeps a close eye on core inflation, stripping out volatile food and energy prices. In the euro zone, that figure fell to 2.9 percent in the year to March, below the 3 percent mark for the first time since Russia’s all-out war against Ukraine broke out in February 2022, driving up energy prices.

Germany, the euro zone’s largest economy, saw consumer prices rise at an annual rate of 2.3 percent in March, the slowest inflation since June 2021.

The latest figures will support the view that the ECB could soon start cutting interest rates, which the bank held steady at 4 percent last month. However, analysts expect the central bank to wait for further evidence that the cooling trend is continuing.

“While core inflation eased, the persistence of services inflation and the ECB’s desire for more pay data make a rate cut unlikely in April,” Rory Fennessy, an economist at Oxford Economics, wrote in a note.

Inflation in the United States has cooled but has been on a bumpy path, reinforcing the Federal Reserve’s decision to tread cautiously on possible interest rate cuts. The Bank of England has also kept interest rates relatively high as there are signs that inflation in the UK is easing.

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2024-04-03 10:19:49