Inflation in the eurozone cooled further in March, calmed by an easing of energy tariffs and prices in the services sector, the EU's statistics agency said Tuesday.
Inflation in the single currency area reached 2.2%, down slightly from the 2.3% figure for February, Eurostat said, bringing the rate close to the European Central Bank's (ECB) 2% target.
The data is likely to add to already widespread expectations for another ECB interest rate cut later this month.
Inflation has gradually eased since a peak in October 2022 following Russia's invasion of Ukraine, which sent energy prices soaring.
The ECB has cut interest rates six times since last June and investors are increasingly convinced of another such move on April 17 as the economy remains stagnant, energy prices have retreated and the euro has surged.
A recent rise in long-term yields has, meanwhile, undone some of the ECB's past efforts to lower borrowing costs.
Last month the bank lowered its benchmark deposit rate by a quarter of a percentage point to 2.5%, but its head Christine Lagarde warned of risks from U.S. tariff threats and massive German spending plans.
U.S. President Donald Trump is scheduled to unveil his latest wave of tariffs on Wednesday.
Analysts at investment research group Capital Economics said the March fall in inflation "strengthens the case for the ECB to cut interest rates at the meeting on 17th April," again by a quarter-point.
While a looming trade war with the United States poses a fundamental threat to the eurozone economy, recent signals from the ECB suggest that inflation worries remain muted.
Tariffs and the inevitable retaliatory measures slow growth and push up prices, potentially creating an environment of stagnation with high inflation, commonly called stagflation.
But Luis de Guindos, the ECB's vice president, last week argued that the hit to growth would be so detrimental that it would essentially extinguish the extra price pressure, leaving just a "short-lived" impact on prices.
Lagarde has said a trade war could subtract half a percentage from the bloc's economic growth, a huge hit given that last year's overall expansion was just 0.9%.
A closely watched core inflation, which excludes volatile food and energy prices, slowed to 2.4% last month from 2.6%. That was below expectations for 2.5%, a likely relief for the ECB which has long worried about stubborn underlying price growth.
Bolstering bets on rate cuts, price growth in services slowed to 3.4% from 3.7% as many policymakers had predicted.
Services have been the biggest headache for policymakers for the past year since inflation had been stuck near 4% for nearly all of 2024, challenging the narrative that easing wage growth is slowly extinguishing price pressures.
In energy, the rate was negative 0.7%, from 0.2% the month before.
Food price inflation accelerated further, however, driven by a 4.1% increase in the cost of unprocessed foods.
The ECB last month said it expected inflation to hover near the current level for the rest of the year before falling to its 2% target at the start of 2026. But some have argued that recent changes in financing conditions point to an earlier date.
While a rate cut in April is far from a done deal, policy doves have been out in force making the case for a move even as hawks, who may plead for a pause, have been more quiet.
A potential source of concern may be that the labor market remains tight. Unemployment fell to an all-time low of 6.1% in February, separate Eurostat data showed on Tuesday.
Markets now see a 70% to 75% chance of a cut in the ECB's deposit rate this month, with a move by June more than fully priced in. Rates are then seen coming down further in 2025, and investors see the deposit rate bottoming out at 2% or 1.75% at the turn of the year.
