Inflation in the 20-nation euro zone eased to 2.4% in March, according to flash figures published on Wednesday, boosting expectations for interest rate cuts to begin in the summer.
Economists polled by Reuters had forecast the rate would hold steady against the previous month at 2.6%.
The core rate of inflation, excluding energy, food, alcohol and tobacco, cooled from 3.1% to 2.9%, also coming in below expectations.
However, inflation in services — a key watcher for the European Central Bank — remained stuck at 4% for a fifth straight month, pointing to continued pressure from wage growth.
Another indicator for the ECB released Wednesday, the euro area unemployment rate, stood at 6.5% in February, stable against January but down from 6.6% in February 2023.
Price rises in France and Spain came in lower than forecast last week. On Tuesday, headline inflation in the bloc’s biggest economy, Germany, was estimated at a three-year low of 2.2%.
Markets expect the euro zone’s central bank will begin lowering interest rates in June — a position reflected in the recent messaging of ECB decision-makers. They are next set to hold a monetary policy meeting on April 11.
“The current narrative is clearly pointing to a first rate cut in June as this will be the meeting with a full batch of important data available: a fresh round of ECB staff forecasts, GDP growth and wage growth data for the first quarter of 2024 and results of the Bank Lending Survey, just to mention the most relevant ones,” Carsten Brzeski, global head of macro at ING, said in a note on Wednesday.
“We expect the ECB to stay on hold next week and to further prepare markets for a first rate cut in June.”
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