Eurozone inflation falls faster than expected
FRANKFURT
The inflation that has squeezed European shoppers fell more than expected in March to 2.4 percent, as cost spikes in the grocery aisle eased and overall price rises headed down in the two biggest economies, Germany and France.
The annual figure for the 20 countries that use the euro currency came in below the 2.5 percent predicted by financial markets and brings the European Central Bank (ECB) ever closer to its inflation goal of 2 percent.
But analysts say the decline from 2.6 percent in February, though welcome, would likely not be enough to move up the ECB’s first interest rate cut.
The bank meets April 11 but the first reduction in borrowing costs is not expected until June despite an economy that’s failing to grow, several analysts said.
Food inflation fell to 2.7 percent from 3.9 percent, and energy prices dropped by 1.8 percent, according to numbers released yesterday from Eurostat, the European Union’s statistics agency. Meanwhile, core inflation, which excludes volatile food and energy costs, eased to 2.9 percent from 3.1 percent in February.
Annual inflation fell to 2.3 percent in Germany from 2.7 percent the month before and to 2.4 percent in France from 3.2 percent. The data from Germany, Europe’s largest economy, “brings some relief for the ECB,” said Carsten Brzeski, global head of macro at ING.
But prices for services, which include everything from movie tickets to medical care, are still high.
The ECB also will want to see the latest numbers on wage increases, meaning that “as long as the economy doesn’t fall off a cliff, the ECB will sit tight next week, waiting for more data and the June meeting,” he said.
The U.S. Federal Reserve also is expected to cut rates later this year. Fed officials have penciled in three rate cuts, even as the decline in inflation there has slowed.
