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Summary: Eurozone inflation continues to slow in March

BRUSSELS, April 3 (Xinhua) — The euro zone saw its annual inflation rate fall more than expected in March, marking a third consecutive month of decline, raising optimism about a possible reduction in interest rates by the European Central Bank (ECB) in June.

Annual inflation in the euro zone is expected to fall to 2.4 percent in March, from 2.6 percent in February, according to a preliminary estimate released Wednesday by Eurostat, the statistical office of the European Union.

The core inflation rate, which excludes volatile goods such as energy, food, alcohol and tobacco, fell to 2.9% in March, hitting a two-year low.

Despite the overall decline, inflation in the services sector remained relatively high at 4 percent for the fifth consecutive month, highlighting its continued contribution to the inflationary environment.

At the same time, the inflation rate for food, alcohol and tobacco eased to 2.7 percent in March. The rate of non-energy industrial goods also saw a reduction, falling to 1.1% from 1.6% the previous month.

Notably, inflation rates varied between the euro zone’s largest economies, with Germany reporting a rate of 2.3 percent, France 2.4 percent and Italy 1.3 percent.

Bert Colijn, senior economist at ING, described the March inflation figure as “encouraging”, noting that the better-than-expected results increase the chances of an ECB rate cut.

He warned, however, that the ECB would be in no rush to cut rates this month after ECB policymakers meet next week.

Similarly, Angel Talavera, head of European economics at Oxford Economics, said on social media platform

Eurostat also revealed on Wednesday that the euro zone unemployment rate stood at 6.5 percent in February, in line with January figures and reflecting a slight improvement from 6.6 percent in the same month. of the previous year.

According to Colijn, the labor market remains robust, with unemployment at its lowest level since the creation of the eurozone in 1999.

He warned that strong wage growth and a tight labor market could slow the reduction in inflation more than the ECB hopes. Still, he believes the labor market is unlikely to delay rate cuts much, but will moderate any future rate cuts from the ECB.

“June will be the time for the ECB to start cautiously cutting rates,” he said, forecasting a total reduction of 0.75% for this year.

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