Eurozone inflation drops further ahead of trade turmoil

Bert Colijn ING Economic and Financial Analysis

Inflation ticked down from 2.3 to 2.2% in March. This was not just on lower energy prices, but also a pronounced decline in services inflation. Even though the latter is in part driven by a late Easter, the decline is a dovish sign for the ECB ahead of possible trade upsets to the inflation outlook.

While inflationary risks remain prominent for the moment, recent months have shown quite benign developments in core inflation. While core had stuck stubbornly at 2.7% for months, it has now fallen from 2.6 in February to 2.4% in March. This is mainly on the back of weaker services inflation, which dropped from 4% in December to 3.4% in March.

Weak services inflation is in part due to an Easter effect as the holiday falls late this year. That usually results in softer services inflation in March and a bounce back in April. Then again, businesses in the service sector have seen selling price expectations soften and indicated weakness in business activity in recent months, so a return to a lower inflation trend seems in the making regardless of short-term Easter effects.

Uncertainty around the short-term outlook for inflation remains very high. US tariffs could result in deflationary pressures on the eurozone market as they depress exports and therefore growth. Besides that, it also results in more supply in the eurozone market as the US increases barriers to access. Retaliatory measures from the European Commission will likely have an upward effect on eurozone inflation, though, as they are essentially a domestic tax that gets introduced and will be paid for by consumers to some extent.

Last year at the March press conference, ECB president Lagarde said, “we will know a little more in April and a lot more in June”, opening the door to the first rate cut of the cutting cycle. This year, she’ll know an awful lot more in April, as much more will be known about US tariffs imposed on European products and about the retaliation that the European Commission is preparing at the April ECB meeting. That will be key in determining where rates are headed. But all things being equal, today’s inflation print was soft enough to justify another rate cut to get the policy rate more firmly in neutral territory.

Read the original analysis: Eurozone inflation drops further ahead of trade turmoil

Author

Bert Colijn

ING Economic and Financial Analysis

Bert Colijn is a Senior Eurozone Economist at ING. He joined the firm in July 2015 and covers the global economy with a specific focus on the Eurozone.

AUD/USD sits at two-month lows near 0.6950 after Australian CPI data

AUD/USD is sitting at two-month lows near 0.6950 in the Asian session on Wednesday, as below-expectations August Australian underlying CPI data pours cold water on expectations for further RBA interest rate hikes. Chinese PMI data also fail to inspire the Australian Dollar, despite a pause in the US Dollar advance.

USD/JPY stays weak below 157.00 amid Japanese intervention risks

USD/JPY keeps losses below 157.00 in the Asian session on Wednesday, as hawkish BoJ expectations, along with intervention risks, underpin the Japanese Yen, countering dismal domestic factory output and retail sales data. Meanwhile, a broad US Dollar retreat also collaborates to the pair's downside.

Gold flat lines below $4,200 as traders await US PCE data for Fed rate cues

Gold extends its consolidative price move heading into the European session, trading below the $4,200 mark amid mixed fundamental cues. Falling US bond yields drag the US Dollar away from the two-month high, touched on Tuesday, and act as a tailwind for the commodity. However, hawkish US Federal Reserve expectations cap the upside as traders await important US macro data before placing fresh directional bets on the non-yielding bullion.

Aave Price consolidates below $161 as profit-taking emerges after 10% surge

Aave slips below $161 on Wednesday after surging more than 10% the previous day, with on-chain data suggesting increased profit-taking. Meanwhile, Aave founder Stani Kulechov is considering an AAVE token-burn mechanism under Aavenomics 3.0, adding a potential catalyst for AAVE.

Warning: The RBI's October rate hike may be too late as oil risks mount

The Indian Rupee (INR) is one of the worst-performing Asian currencies in 2026, down about 6.5% year-to-date against the US Dollar (USD) and trading near historic lows ahead of the October 5–7 Reserve Bank of India (RBI) meeting. Economists expect the RBI to raise its repo rate by 25 basis points (bps) next month and follow up with another increase in December to counter rising retail inflation.

Silver is more volatile than Gold ahead of PCE and NFP. This chart shows the positioning gap

The market’s attention is focused on American data this week, but there’s something only those with a trained eye may be looking at: Gold and Silver positioning gap. Financial markets are moving on fears, mostly related to persistently high energy prices driven by the Middle East war. Sure, the US Dollar (USD) is strong, but at what cost?