Eurozone Inflation Unexpectedly Cools, Paving the Way for Rate Cuts

April 3, 2024

Inflation across the 20-nation eurozone unexpectedly eased in March, boosting expectations that the European Central Bank (ECB) will begin cutting interest rates this summer.

Eurozone inflation eased to 2.4% in March, according to the European Union’s statistics agency. Economists polled by Reuters had expected inflation to hold steady at 2.6%, where it had been the month prior. 

The core inflation rate, which excludes energy, food, alcohol, and tobacco, cooled from 3.1% to 2.9%, also below expectations.

Markets expect the ECB to begin lowering borrowing costs in June, based on the recent messaging of ECB policymakers. They are next set to hold a monetary policy meeting on April 11, where they are widely expected to hold rates steady.

The ECB is expected to follow the Federal Reserve’s lead with regard to the timing and size of the cuts, though ECB officials have signaled that they will cut sooner and larger than the U.S. if the data supports it, and some economists are anticipating five rate cuts from the ECB rather than the three that Fed officials have penciled in.


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