Eurozone inflation pick-up complicates outlook for monetary policy

Eurozone inflation accelerated 2.5% year-on-year in March, up from 1.9% in February.

The pick-up was primarily driven by energy inflation, which rose to 4.9% from -3.1% in February, reflecting higher global energy prices amid supply disruptions stemming from conflict in the Middle East.

Looking ahead, the ECB is likely to remain cautious, with ECB president Christine Lagarde’s recent statement hinting at readiness to hike rates should it be deemed necessary.

As it stands, Cebr expects the ECB to hold key policy rates at their current levels through 2026, though risks are now firmly tilted to the upside.