Eurozone's March inflation drops to 1.5% on Easter effects - ING

Bert Colijn, senior economist at ING, said that the Eurozone’s inflation dropped slightly from 1.5 percent to 1.4 percent in March, with core inflation falling to 0.8 percent as the timing of Easter continues to distort inflation in the spring months.

He notes that “although a detailed breakdown isn't available yet, package holidays inflation is likely to have negatively impacted this release as 2018 Easter holiday started in March. The decline in services inflation from 1.4 percent to 1.1 percent certainly suggests this has had a considerable impact.”

Colijn also added that “next month will likely see some overshooting of 1 percent due to the Easter effect reversing, but the underlying story remains one of subdued core inflation as businesses continue to take higher wage growth in their margins because of global uncertainty.”

At the same time, “headline inflation dropped less than the core and stands at 1.4 percent as fuel prices have rebounded over recent weeks”, he said.

ING economist also suggested that “a drop to 1 percent is possible, meaning that the rate is likely to move away from the ECB target over the coming months before moving closer again.”