Eurozone inflation easing leading to hopes of an ECB rate cut in June

Statistics from Eurostat show that inflation in the Euro currency area was 2.4pc last month.

This is down from 2.6pc in February.

There was a 4pc fall in the cost of services, with food, alcohol and tobacco prices down 2.7pc.

Energy costs were down by 1.8pc, the flash estimate of inflation for the currency area shows..

Inflation in this country for March was estimated to be 1.7pc, the first time in three years that the rate was below 2pc.

The European Central Bank (ECB) has a target rate of 2pc for inflation.

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The hope now is that the ongoing drop in inflation across Europe will mean the ECB will soon begin a cycle of interest rate reductions.

The Governing Council of the ECB, which decides on interest rates, meets tomorrow.

Some economists think the ECB could announce a rate cut at this meeting.

However, most economists believe the ECB will wait for more information on wage rises and will cut in June.

Justin Doyle of specialist bank in Dublin, Investec, asked: “With the Swiss National Bank reducing its main interest rate by a surprise 25bps already due to inflation heading back to target on their projections – could this give the ECB the confidence to cut as early as April?

“Given recent comments from Governing Council members, we stick with our baseline view that the ECB would prefer to wait for wage data and only make a first move in June.”

Euro area inflation has tumbled over the past year and economic growth stalled, shifting the debate to just how quickly and how far the ECB should move in reversing a record string of rate hikes.

Austrian policymaker Robert Holzmann said the ECB could start cutting interest rates in June as inflation may fall quicker than expected but should not get too far ahead of its US counterpart.

"April is not on my radar," Holzmann told Reuters in an interview. "In June we will have more information."

"If the data allows it, a decision will be made," he said. "I don't have an in-principle objection to easing in June, but I'd like to see the data first and I want to stay data-dependent."

Holzmann is considered by some to be the single most conservative member of the ECB's 26-member Governing Council, often batting back rate-cut talk, so his cautious nod to a June easing suggests a growing consensus for a move already raised by several others.

But he warned that if the US Federal Reserve does not cut rates in June, the market reaction to the policy divergence would negate much of the benefit of an ECB cut, so the central bank should be careful in going it alone.