Eurozone Inflation Falls to 2.2% in March 2025
Brussels, Tuesday, 1 April 2025.
Eurozone inflation has dropped to 2.2% in March, sparking expectations of a 25 basis point rate cut by the ECB amid looming U.S. tariffs and fluctuating market conditions.
Core Inflation and Service Sector Trends
The latest Eurostat data reveals a notable decline in core inflation, which dropped to 2.4% in March 2025 from 2.6% in February [1]. Services inflation, a key component of the overall index, demonstrated significant easing, falling to 3.4% from 3.7% in the previous month [2]. Energy prices have shifted into deflationary territory, registering a -0.7% decline, compared to a 0.2% increase in February [5].
ECB Policy Implications
The European Central Bank appears poised for monetary policy adjustment, with market analysts anticipating a 25 basis point rate cut at the upcoming April 17 meeting [1]. This consideration follows the ECB’s previous actions, which have brought the deposit facility rate down from 4% to 2.5% since June 2024 [1]. According to Jack Allen-Reynolds, deputy chief Euro zone economist at Capital Economics, ‘This decline, together with strong evidence that it will fall further… will be enough to prompt the ECB to cut interest rates by 25bp again later this month’ [1].
U.S. Tariff Impact Concerns
The inflation outlook faces new complexities as the U.S. administration prepares to implement significant trade measures, including a 25% levy on imported cars [1]. ING’s chief Netherlands economist, Bert Colijn, suggests that ‘US tariffs could result in deflationary pressures on the eurozone market as they depress exports and therefore growth’ [1]. This development introduces additional uncertainty into the eurozone’s economic landscape [alert! ‘exact implementation date of US tariffs not specified’].
Regional Variations
Individual member states show varying inflation patterns, with Ireland reporting a 1.8% increase in the 12 months to March 2025, marking a notable deviation from the eurozone average [6]. The harmonized inflation data demonstrates the complex nature of price pressures across the currency bloc, with food prices in Ireland, for instance, showing a 3.2% increase over the past year [6].