Eurozone Inflation in Focus Ahead of ECB Policy Pivot
Article published on April 2nd, 2025 3:45 AM UK Time
The eurozone’s latest HICP inflation print for March is set to be released this week, and it will serve as a crucial data point for traders trying to gauge the timing of the European Central Bank’s first rate cut. With STIR markets already leaning toward a 90% probability of an April easing, any surprise move lower in the data could all but seal the deal—though looming trade uncertainty from the US still clouds the path ahead.
What to Expect from the March HICP Data
🔹 Headline HICP (Y/Y): Expected to hold steady at 2.3%, following a slight dip in February from 2.5% to 2.4%.
🔹 Core HICP (Y/Y): Forecast to ease to 2.5% from 2.6%.
February’s print showed a notable pullback in services inflation, which fell to 3.7% from 3.9%, while the super-core metric declined from 2.7% to 2.6%, bolstering confidence that inflation pressures are easing beneath the surface.
According to Investec, energy prices are expected to register another monthly decline, consistent with recent commodity price action. However, food and goods prices may edge slightly higher. The focus, however, remains squarely on services inflation, which is seen as a key component in confirming that disinflation is becoming sustainable.
ECB Rate Cut Outlook: April Gaining Momentum
Pricing for an April rate cut has risen to 90% since the March meeting, with investors increasingly confident that the ECB will begin normalizing policy as inflation trends toward target.
A soft inflation reading this week could cement the case for an April cut, especially if super-core and services inflation continue their decline.
However, some ECB Governing Council members remain divided, particularly over how to weigh the incoming inflation data against potential growth shocks tied to new US trade policy, and an increasing German defence budget.
Market Implications: What to Watch
📉 If HICP Comes in Softer Than Expected
EUR could weaken, as ECB cut expectations are reinforced.