A inflation and euro zone decreased as expected last month and a measure of underlying price pressures also fell, probably increasing the expectations already widespread from another cut at the fees for the European Central Bank (ECB) Not end of April.
The annual increase in consumer prices in the 20 countries that share the euro decreased to 2.2% in March, 2.3% in February, in line with the expectations of Reuters survey, due to a large drop in energy costs and the slowdown in service inflation, showed eurostat data on Tuesday (1st).
The index core, which excludes volatile food and fuel prices, slowed from 2.6% to 2.4%. This result was below expectations of 2.5%, which probably represents a relief for the ECB, which has long worried about the persistent high price of prices.
The ECB has cut interest rates six times since June last year and investors are increasingly convinced that there will be another movement of this type on April 17, as the economy remains stagnant, energy prices have retreated and Euro rose.
Meanwhile, a recent increase in long -term income has broken some of the previous ECB efforts to reduce loan costs.
Although the imminent trade war with the United States represents a fundamental threat to the eurozone economy, recent ECB signs suggest that concerns about inflation remain low.
Tariffs and inevitable retaliatory measures slow growth and increase prices and can create a stagnation environment with high inflation, commonly called stagflation.
However, Luis de Guindos, Vice President of the ECB, argued last week that the impact on growth will be so harmful that it will essentially extinguish the extra pressure of prices, leaving only a “short-term” impact on prices.
PCP President Christine Lagarde said a trade war could subtract half a percentage point of the bloc’s economic growth, a large blow, as last year’s overall expansion was only 0.9%.
Reinforcing bets on interest cuts, the advancement of services prices slowed down 3.4%, from 3.7%, as many PCS authorities had foreseen.
Services have been the biggest headache for monetary policy authorities in the last year, as inflation has been trapped close to 4% throughout 2024, challenging the narrative that salary growth reduction is slowly extinguishing price pressures.
However, food price inflation has accelerated further, driven by an increase of 4.1% in the cost of non -processed foods.
Markets now see a chance of 70% to 75% cutting at the 2.5% ECB deposit rate in April, with a movement up to June more than fully priced.
Then interest should fall even more by 2025, and investors see the deposit rate reaching 2.00% or 1.75% at the turn of the year.
