Inflation continues its path of moderation in the Eurozone and the first reduction in interest rates by the European Central Bank (ECB) is getting closer and closer since the entity began to tighten its monetary policy in July 2022 to counteract the crisis. inflationary. The advance of the data made public this Wednesday by Eurostat, the European statistics office, indicates that the general CPI rate would have moderated by two tenths in the region to 2.4%.
Although the year-on-year increase in the cost of services remained at 4%, the increase in the price of non-energy industrial goods slowed to 1.1%, half a percentage point less than in February. Regarding underlying inflation, excluding the prices of energy and fresh food and tobacco from its calculation as they are considered more volatile, it would have also moderated by two tenths to 2.9%.
By country, the Spanish harmonized inflation rate stood at 3.2% in March, compared to 2.9% in February, thus widening the differential in unfavorable prices for the country with respect to the eurozone average to eight tenths. It is thus positioned as the large euro economy with the greatest increase in the cost of living. The highest inflation rates are recorded in Croatia (4.9%), Austria (4.2%) and Estonia (4.1%), while the lowest are in Lithuania (0.3%), Finland (0. 7%) and Latvia (1%).
The annual CPI rate had moderated two tenths in February to 2.6%, thanks to the fact that energy prices continued to fall in relation to the same month a year ago, although with less intensity. “As is happening in the US, the last effort – ‘the last mile’ – to bring inflation to the 2% objective established by the central banks is costing more than expected,” Link Securities point out.
The ECB decided to maintain interest rates at 4.5%, the highest since the creation of the euro, at its meeting on March 7. Since then, despite confirming with its own projections that the economy of the entire euro zone continues to show signs of weakness and that the rise in prices is moderating, the entity maintains its policy of caution due to fear of more structural pressures from the inflation.
In its latest statement, the issuer stressed that especially strong wage growth could keep rates at maximum levels for longer than expected. In reality, the idea that different members of its Governing Council repeat like a mantra is that the effects of lowering rates too soon will be much worse for activity than those of delaying this decision somewhat.
In principle, analysts and experts point to this summer – between the months of June and July – as the moment when, in all probability, the reductions in the price of money will begin both in the United States and in the Eurozone. “It is unlikely that the possible noise in inflation data around Easter or tax increases in some countries will change this situation,” says Martin Wolburg, senior economist at the management company Generali AM.
This Tuesday it was the German statistics office, Destatis, that announced that inflation in the region’s largest economy would have also moderated by three tenths in March to 2.2%, its lowest level since 2021, that is, since before the Russian invasion of Ukraine occurred and the energy and price crisis worsened.
