Consumer prices in the eurozone unexpectedly fell to 2.4% in March, a decrease from 2.6% in February, according to recent data. Germany also experienced a drop in its annual inflation rate, which now stands at 2.2% for March. Analysts had varied predictions for the inflation rate, ranging from no decrease to a smaller dip to 2.5%.
The decline in inflation comes after a peak of 10.6% in October 2022, largely attributed to Russia’s invasion of Ukraine. Despite the drop, experts do not foresee a cut in interest rates by the European Central Bank at their upcoming monetary policy meeting on April 11. The first reduction in borrowing costs is not expected until June.
The ECB had raised interest rates significantly between July 2022 and September 2023 but has maintained them at a steady pace since October 2023. While higher interest rates can help combat inflation by making credit more expensive, they can also potentially slow economic growth.
Many governments are pushing for the ECB to declare victory over inflation and reduce rates once again. However, experts believe that a rate cut may not happen until June, as the central bank remains cautious about the economic outlook. Investors will be closely watching for any updates from the ECB’s next meeting regarding future monetary policy decisions.
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