Inflation in France and Spain undershot expectations, supporting calls for more interest-rate cuts by the European Central Bank.
Consumer-price growth held steady at 0.9% in France this month, defying analyst predictions for an uptick. In Spain, they slowed to 2.2% — a much deeper deceleration than expected — and are now approaching the ECB’s 2% target.
European bonds held on to earlier gains. Germany’s 10-year yield was six basis points lower at 2.71%, with the equivalent French and Spanish rates posting a similar drop. Traders added slightly to ECB rate-cut bets for this year, pricing 60 basis points in total. That’s equivalent to two quarter-point reductions and a 40% chance of a third.
Friday’s data provide an early indication of price momentum in Europe this month, before publications from other major member-states, plus the currency bloc itself, next week. A Bloomberg Economics nowcast predicts a slowdown to 2.1% for the eurozone.
The reports will be a crucial input for the ECB’s 17 April rate decision, with policymakers still assessing how US president Donald Trump’s tariffs and the upcoming surge in European military spending will influence inflation and economic growth.
After six reductions in borrowing costs since June — bringing the deposit rate to 2.5% — ECB officials are sending mixed signals on what to do next. Doves prefer another cut in April, with Executive Board member Piero Cipollone saying the case for more easing has strengthened. Belgium’s Pierre Wunsch, though, reckons a pause should be considered.
France’s inflation rate has now been below the ECB’s goal for seven straight months. In March, both energy and manufactured goods prices declined year-on-year, though inflation accelerated slightly in the closely watched services sector to 2.3% from 2.2%.
The main driver for the slowdown in Spain was a drop in electricity prices, with fuel costs contributing to a lesser degree. A gauge of core inflation that excludes energy and some food products fell to 2%.
Meanwhile, inflation expectations among European consumers were stuck at above 2% in February, according to an ECB survey published later Friday. Prices were seen rising 2.6% over the next 12 months and 2.4% over the next three years. Such views help steer inflation via wages and prices.
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