Eurozone inflation expected to ease to 2.4% in March: Eurostat

The Eurozone saw its annual rate of inflation drop more than expected in March, marking a third consecutive month of decline, sparking optimism for a potential European Central Bank (ECB) interest rate cut in June, reported Xinhua.

Annual inflation in the Eurozone is expected to drop to 2.4 percent in March, down from 2.6 percent in February, according to a preliminary estimate released by Eurostat, the statistical office of the European Union, on Wednesday.

Core inflation rate, which excludes volatile goods such as energy, food, alcohol, and tobacco, cooled to 2.9 percent in March, reaching a two-year low.

Despite the overall decrease, inflation in the services sector remained relatively high at 4 percent for the fifth consecutive month, underscoring its ongoing contribution to the inflationary backdrop.

Meanwhile, the inflation rate for food, alcohol, and tobacco softened to 2.7 percent in March. The rate for non-energy industrial goods also saw a reduction, falling to 1.1 percent from 1.6 percent in the previous month.

Notably, inflation rates varied among the Eurozone's largest economies, with Germany reporting a 2.3 percent rate, France at 2.4 percent and Italy at 1.3 percent.

Bert Colijn, a senior economist at ING, described the March inflation figure as "encouraging," noting that the better-than-expected results boost chances of ECB rate cuts.

However, he warned that the ECB will be in no rush to cut rates this month after ECB policymakers meet next week.

Similarly, Angel Talavera, head of Europe Economics at Oxford Economics, indicated on the social media platform X that the persistent 4-percent services inflation "kills any chances of an April cut."

Eurostat also revealed on Wednesday that the unemployment rate in the Eurozone stood at 6.5 percent in February, consistent with January's figures and reflecting a slight improvement from 6.6 percent in the same month the previous year.

According to Colijn, the labor market remains robust, with unemployment at its lowest level since the Eurozone's inception in 1999.

He cautioned that strong wage growth and a tight labor market might slow the reduction in inflation more than the ECB hopes. Nonetheless, he believes the labor market is unlikely to delay rate cuts much, but will temper any future rate cuts from the ECB.

"June will be the moment for the ECB to start cautiously reducing rates," he said, anticipating a total reduction of 0.75 percent for this year.