The inflation quote was announced by France’s statistics authority on Good Friday. Consumer prices rose 2.3 percent annually, down from 3.2 percent in February and well below the 2.8 percent expected in a Reuters poll of economists. Above all, food prices were responsible for the slowdown.
On a monthly basis, the price increase rate fell from 0.9 percent higher prices between January and February to a 0.3 percent increase in March compared to February.
France is the eurozone second only to Germany largest economy, and later on Good Friday morning – at 11 – inflation statistics were reported from the third, Italy. Here, too, the outcome was slightly better than expected: plus 1.3 percent in March, measured in EU-harmonized consumer price increases, against an expected 1.5 percent according to Bloomberg.
The French figures seem to strengthen the market’s belief that the ECB will start lowering the key interest rate in June from the current level of 4 percent, wrote Financial Times between the French and Italian publications.
It can also conceivably happen already at the next meeting, on April 11, according to what France’s central bank governor reasoned about in a speech on Thursday that the newspaper reproduces. In that case, this is on the condition that inflation continues to decrease faster than forecast, something that thus seems to have happened. Also in Spain, inflation statistics came in slightly lower than expected on Wednesday.
According to the FT, however, what worries the rate-setters at the ECB is the rate of wage growth in the labor-intensive service sector, which was 3.9 percent in February. Headline inflation in the euro zone in February was 2.6 percent, eight percentage points lower than the peak of 10.6 percent in October 2022 but still higher than the target level of 2.0 percent.
Macroeconomist Andreas Steno Larsen joins the French central bank governor in comments on X (formerly Twitter) on Good Friday morning, noting that seasonally adjusted French March inflation was the lowest since before the pandemic.
“Is an April reduction from the ECB on the cards?”, he writes, calling the statistics “very dovish”.
Analysfirman Oxford Economics on the other hand, considers a reduction in April unlikely, despite today’s data from both France and Italy suggesting that inflation continues to slow down, with above all a cooling of food price inflation.
“Eurozone inflation statistics will be released next week and offer a clearer picture, but we still believe it is unlikely that a rate cut will be on the table at the next ECB meeting in April,” writes the think tank’s Milan-based senior economist Paolo Grignani in a commentary published just before lunchtime on Good Friday, without elaborating on the matter further.
