As expected, the inflation rate in the euro zone fell significantly from 8.5% to 6.9% in March. By contrast, underlying inflation increased further. In this respect, pressure on the ECB to raise key interest rates further remains high, economists at Commerzbank report.

Euro area inflation rate falls to 6.9%, but core rate continues to rise

“According to preliminary calculations by Eurostat, the inflation rate in the euro area fell by an impressive 1.6 percentage points to 6.9% in March. The core inflation rate – i.e. the year-on-year rate of change in the consumer price index excluding energy, food and beverages – rose by 0.1 percentage points to 5.7%.”

“The inflationary push from energy prices has run its course. In the coming months, energy prices are even likely to depress the inflation rate slightly. Food is also unlikely to boost inflation in the next few months. By contrast, underlying inflation is unlikely to ease much for the time being. The core inflation rate is not expected to reach its high point until July and will only decline slowly thereafter.”

“The ECB has repeatedly emphasized that it is currently focusing primarily on the core inflation rate. In this respect, the ECB is still under pressure to raise key rates further.”