Eurozone inflation falls sharply to 6.9% as energy costs recede

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Eurozone inflation has fallen sharply to its lowest level for a year after a decline in energy costs.

Harmonised consumer prices in the euro area rose by 6.9 per cent in the year to March, down from 8.5 per cent the previous month, to reach their lowest level since February 2022.

The drop, due to a 0.9 per cent fall in energy prices, was steeper than a forecast by economists polled by Reuters, who had expected March eurozone inflation of 7.1 per cent.

It will bolster demands for the European Central Bank to stop raising interest rates, already at their highest level since the 2008 financial crisis.

The past month’s turmoil in the banking sector has also raised the prospect of a credit crunch that could slam the brakes on both inflation and growth in the coming months.

However, ECB officials have signalled they are likely to continue raising rates at their next policy meeting in May unless the banking turmoil worsens.

The drop in headline inflation came despite a further acceleration in the rate of price increases for food and services.

Core inflation, which excludes energy and food costs to give a better view of underlying price pressures, hit a new eurozone high of 5.7 per cent in March, up from 5.6 per cent the previous month.

Source: Financial Times


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