(Updated with details)
FRANKFURT, April 17 (Reuters) – Euro zone inflation slowed year-on-year in March, in line with initial estimates, final data released by Eurostat on Wednesday showed, reinforcing expectations of a reduction in interest rates. interest from the European Central Bank (ECB) in June, although rising energy costs and the weakness of the euro cloud the outlook.
Over one year, the consumer price index calculated according to European HICP standards stood at 2.4%, as indicated in the “flash” estimate and in the Reuters consensus, after 2.6% in February.
From one month to the next, inflation in the 20 countries having adopted the single currency was, however, slightly higher than at first reading, recording an increase of 0.8%, compared to an initial estimate of 0. 6%.
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Excluding energy and unprocessed food products, inflation also stands at 0.8% on a monthly basis – compared to an initial reading of 0.6% – and is confirmed at 3.1% on an annual basis.
An even narrower measure of price developments, which also excludes alcohol and tobacco, shows that inflation stood at 1.1% month-on-month and 2.9% year-on-year. annual, which confirms the first estimate.
While inflation has slowed rapidly over the past year, paving the way for interest rate cuts starting in June, the coming months are likely to bring fluctuating data on price growth and a return laborious towards the 2% objective.
Higher oil prices and a weak euro put upward pressure on prices, while persistent service costs increase the risk that underlying inflation growth remains above target .
The euro has weakened about 4% against the dollar since the start of the year, a move exacerbated by the growing possibility that the Fed will keep rates high longer than expected due to persistent inflation and the resilience of the economy.
However, according to an ING note, the ECB’s main concern now is the risk of a rebound in oil prices and a further escalation of conflicts in the Middle East.
Investors now only expect 75 basis points of ECB rate cuts this year, or two cuts after June, which represents a step back from expectations two months ago of between 4 and 5 cuts. (Report by Balazs Koranyi, French version by Diana Mandiá, edited by Blandine Hénault)
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