The fall in inflation has now increased expectations of an interest rate cut by the European Central Bank (ECB), which is widely expected to loosen monetary policy at its meeting in June.
However, it is still expected to hold rates steady at its next meeting on 11 April as more data on wage growth will come in May.
“With inflation now within spitting distance of the European Central Bank’s 2% targeted level, investors will be even more convinced that interest rate cuts are on the near-term horizon,” Michael Field, European market strategist at Morningstar said.
Carsten Brzeski, global head of macro at ING, said the data from Germany, which is the eurozone’s largest economy, “brings some relief for the ECB”.
Separately, new data also revealed that the unemployment rate for the eurozone came in at 6.5% for February, holding steady after January’s reading was revised higher from 6.4% to 6.5%. The consensus forecast was 6.4%.
