- The main reason behind the 1.6 percentage point drop was the drop in energy costs.
- These numbers do not provide strong enough evidence that the European Central Bank might consider pausing its rate-raising cycle, which began in July.
- The ECB raised rates by 50 basis points in March, raising its main benchmark rate to 3%. However, he did not give any indication of possible rate decisions in the coming months.
A market stall in Madrid, Spain. Analysts digest the latest euro zone inflation figures.
Europa Press News | Europe Press | fake images
Inflation in the Eurozone eased significantly in March as energy prices continued to fall while basic spending reached an all-time high.
Headline inflation in the 20-member bloc hit 6.9% in March, according to preliminary Eurostat figures released on Friday. By comparison, in Februaryheadline inflation stood at 8.5%.
The main reason for this 1.6 percentage point drop was the fall in energy costs.
However, there are other parts of the inflation basket that remain stubbornly high. Food prices were the largest contributors to the headline inflation reading for March.
Core inflation, which excludes volatile energy, food, alcohol and tobacco prices, rose slightly from the previous month. It reached a historical record of 5.7% in March, from 5.6% in February.
These numbers do not provide strong enough evidence that the European Central Bank might consider stopping its rate-raising cycle, which began in July.
“ECB policymakers will not interpret too much the fall in headline inflation in March and will be more concerned that the core rate hits a new record,” said Jack Allen-Reynolds, deputy chief euro zone economist at Capital Economics. in a note on Friday.
He added that the ECB is likely to keep raising rates despite the drop in the head figure.
Isabel Schnabel, a member of the ECB, said on Thursday that the head inflation has started to decline, but core inflation is proving sticky.
While last year’s energy price increases spread rapidly throughout the economy, they are taking longer to dissipate, “and it’s not even clear if it’s going to be completely symmetrical in the sense that everything is going to go away,” he said in an event on Thursday, according to Reuters.
The ECB raised rates by 50 basis points in March, raising its main benchmark rate to 3%. However, he did not give any indication of possible rate decisions in the coming months.
The recent banking turmoil has raised questions about whether central banks have been too aggressive in changing interest rates to cope with inflation. ECB chief economist Philip Lane has said further rate hikes will be needed to tackle high inflation if banking instability dissipates.