A man pushes his shopping cart filled with food shopping and walks in front of an aisle of canned vegetables with “Down price” labels in an Auchan supermarket in Guilherand Granges, France, March 8, 2025.
Nicolas Guyonnet | Afp | Getty Images
Annual Euro zone inflation dipped as expected to 2.2% in March, according to flash data from statistics agency Eurostat published Tuesday.
The Tuesday print sits just below the 2.3% final reading of February.
So called core-inflation, which excludes more volatile food, energy, alcohol and tobacco prices, edged lower to 2.4% in March from 2.6% in February. The closely watched services inflation print, which had long been sticky around the 4% mark, also fell to 3.4% in March from 3.7% in the preceding month.
Recent preliminary data had showed that March inflation came in lower than forecast in several major euro zone economies. Last month’s inflation hit 2.3% in Germany and fell to 2.2% in Spain, while staying unchanged at 0.9% in France.
ECB decision ahead
The figures, which are harmonized across the euro area for comparability, boosted expectations for a further 25-basis-point interest rate cut from the European Central Bank during its upcoming meeting on April 17. Markets were pricing in an around 80% chance of such a reduction after the release of the euro zone inflation data on Tuesday, according to LSEG data.
The easing of services inflation especially increased chances of an ECB interest rate cut, Jack Allen-Reynolds, deputy chief euro zone economist at Capital Economics, said in a note Tuesday.
“We think this decline, together with strong evidence that it will fall further … and continued weakness in the latest activity surveys, will be enough to prompt the ECB to cut interest rates by 25bp again later this month,” he noted.
Separately on Tuesday, data also showed that the seasonally adjusted unemployment rate in the euro area in February hit 6.1%, continuing on its recent downward trend. Economists polled by Reuters had been expecting it to remain unchanged at 6.2%.
Unemployment usually falls in low-interest rate environments, as businesses can boost their labor spending amid cheap borrowing costs. Sine it began cutting interest rates last June, the ECB has brought its key rate, the deposit facility rate, down from 4% to 2.5%.
Tariff uncertainty
The European Union is set to be slapped with tariffs due in effect later this week from the U.S. administration of Donald Trump — including a 25% levy on imported cars.
While the exact impact of the tariffs and retaliatory measures remains uncertain, many economists have warned for months that their effect could be inflationary.
The exact impact of tariff policies from the U.S. and its trading partners on inflation is still largely unclear, according to Bert Colijn, chief Netherlands economist at ING, who said deflation is also an option.
“US tariffs could result in deflationary pressures on the eurozone market as they depress exports and therefore growth,” he said, adding that they could also lead to increased supply of goods on the euro zone market.
The European Union’s response could be critical in shaping the economic impact of the tariff conflict, Colijn explained.
“Retaliatory measures from the European Commission will likely have an upward effect on eurozone inflation, though, as they are essentially a domestic tax that gets introduced and will be paid for by consumers to some extent,” he said.
