MNI Eurozone Inflation Preview – March 2024

EXECUTIVE SUMMARY

Easter Effects Could Keep Services Sticky

Eurozone core and headline inflation are expected to resume their downtrends in February on an annual basis, with headline printing a 3-month low 2.5% Y/Y (vs 2.8% prior) and core returning to below 3% for the first time since February 2022 at 2.9% (3.3% prior).

• Eurozone inflation is seen relatively steady in March, with analyst consensus for headline HICP at 2.6% Y/Y (vs 2.6% prior) and core at 3.0% (3.1% prior).
• As the ECB Governing Council consensus appears to be converging on a first rate cut at the June meeting, incoming inflation data is taking heightened focus. The recent trajectory in underlying HICP has seemingly been disinflationary enough to satisfy even ardent hawks that further progress could warrant a cut by mid-year.
• The March inflation round's most closely-watched quirk will be the early arrival of the Easter holiday weekend. This calendar effect is expected to primarily, and temporarily, impact services prices to the upside. While the consensus is that this will translate a positive effect on inflation via services (with a 5th consecutive 4.0% services reading potentially on the cards), which will reverse in April, some analysts see uncertainty both ways, with potential for downside misses as well.
• Our preview includes analysis of price categories to watch, assessments of underlying inflation trends, outlooks for the French, German, Spanish, and Italian national inflation prints, and sell-side analyst previews.

FOR FULL PDF ANALYSIS:

Mar2024EZCPIPreview.pdf