April 19, 2024

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Eurozone inflation falls by two-tenths in March to 2.4% |  Economy

Eurozone inflation falls by two-tenths in March to 2.4% | Economy

Inflation in the euro zone continued to decline in March, reaching 2.4% on an annual basis, compared to 2.6% recorded in February, according to preliminary estimates by the European Union's statistical office, Eurostat. A moderation of two tenths in March comes as a relief to households' pockets and reinforces the downward development of prices in recent months. It also strengthens the ECB's case to begin unwinding tighter monetary policy starting this summer and to tackle interest rate cuts after a nearly two-year period of strong increases to levels not seen since the turn of the century.

Prices in Europe have moderated from their peak in October 2022, when inflation reached 11.5%. Now that the energy crisis unleashed by the Russian invasion of Ukraine has ended and tensions over food have begun to ease, price increases have eased in most sectors and countries. The difficulties experienced by some countries in the heart of Europe cause demand to stop, leading to lower prices. Moreover, currently, salaries are gradually regaining the purchasing power lost during the first months of the inflation crisis, but the dreaded second round effects have not occurred.

At 3.2%, Spain is above the single-currency area average and has had greater price appreciation than other large European economies, although it is still in the middle zone of the overall inflation table. The increase in prices in Spain is due, above all, to the increase in the value-added tax on electricity from 10% to 21%. Once the energy crisis subsided and prices fell, the Spanish government restored the normal rate it applied to energy consumption.

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The increase in service prices remains at the top of the monthly basket at 4.0%, the environment in which it has remained since the end of 2023. Conversely, food, alcohol and tobacco moderated their rise compared to March (2.7%, compared to 3.9% in February). But the biggest declines continued to be seen in energy prices, albeit more moderately compared to the previous month (-1.8% compared to -3.7%), and unprocessed foods (-0.4% compared to -3.7%) to 2.1% in February. ).

Core inflation – excluding energy and food prices – also continued to decline, reaching 2.9% (compared to 3.1% in February). By removing the most volatile factors from the shopping basket, this is the number the ECB focuses more on when setting interest rates.

Among the most popular European countries, those with the greatest price growth are Greece (3.4%); Spain (3.2%); Netherlands (3.1%); France (2.4%); Germany (2.3%); and Italy (1.3%). In March, Croatia continued to lead the eurozone countries with the highest inflation rates, at 4.9%, followed by Austria and Estonia (4.2% and 4.1%, respectively). On the other hand, at the bottom of the list are Lithuania (0.3%), Finland (0.7%) and Latvia (1.0%).

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