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Eurozone inflation dropped for the second consecutive month in March to 2.2 per cent, prompting ECB rate-setters to assess the need for slower interest rate cuts.
The latest figure came in below February’s 2.3 per cent reading and matched economists’ expectations as per a Reuters poll.
Despite remaining above the ECB’s 2 per cent medium-term target, the central bank believes that the recent uptick in inflation rates was temporary.
February’s initial inflation rate of 2.4 per cent was subsequently revised downwards by 0.1 percentage points.
Concerns over inflationary risks stemming from the potential trade war initiated by US President Donald Trump, as well as increased expenditures on defense and infrastructure, have led the ECB to consider easing the pace of rate cuts.
In its most recent move, the central bank reduced rates for the sixth time since last summer to 2.5 per cent, while indicating that monetary policy is gradually becoming less restrictive, hinting at a more hawkish approach.
ECB president Christine Lagarde highlighted last month the “exceptionally high” level of uncertainty faced by policymakers, emphasizing the inability to guarantee a steady 2 per cent headline inflation rate.
Prior to the latest release, financial markets were pricing in a 75 per cent probability of another quarter-point cut at the upcoming ECB meeting on April 17, based on levels implied by swaps markets.
This article is continually being updated with the latest information.