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Eurozone inflation fell for the second month in a row in March to 2.2 per cent, as ECB rate-setters consider whether to slow the pace of interest rate cuts.
Tuesday’s figure was below February’s reading of 2.3 per cent and in line with the expectations of economists polled by Reuters.
The annual inflation figure is still higher than the ECB’s medium-term target of 2 per cent. But rate-setters at the central bank believe that an increase in headline inflation since the autumn was temporary.
February’s initial figure of 2.4 per cent was later revised down by 0.1 percentage points.
The bank has signalled that it may slow the pace of its rate cuts because of the inflationary risks posed by the looming trade war sparked by US President Donald Trump, as well as increased spending on defence and infrastructure.
Last month, the central bank cut rates for the sixth time since last summer to 2.5 per cent. But it stressed that “monetary policy is becoming meaningfully less restrictive”, wording that suggested a more hawkish stance.
ECB president Christine Lagarde also warned last month that policymakers were facing “exceptionally high” uncertainty. She added that this made it “impossible” to guarantee that “headline inflation will always be at 2 per cent”.
Before Tuesday’s release, financial markets were pricing in a probability of roughly 75 per cent of another quarter-point cut at the next ECB meeting on April 17, according to levels implied by swaps markets.
This is a developing story
