CPI: The Eurozone’s annual inflation rate was 2.2% in March 2025, down from 2.3% in February. The rate before 2025 was 2.4%. In the EU, the annual inflation rate was 2.5% in March 2025, down from 2.7% in February. The rate before 2025 was 2.6%. Eurostat, the European Union statistical office, publishes these figures.
The lowest annual rates were recorded in France (0.9%), Denmark (1.4%) and Luxembourg (1.5%). The highest annual rates were recorded in Romania (5.1%), Hungary (4.8%) and Poland (4.4%). Compared to February 2025, annual inflation decreased in sixteen member states, stabilized in one, and increased in ten countries.
In March 2025, the services sector contributed the highest percentage to the annual inflation rate in the Eurozone (+1.56 percentage points), followed by the food, beverage and tobacco sector (+0.57 percentage points), the non-energy industrial goods sector (+0.16 percentage points), and the energy sector (-0.10 percentage points).
Annual inflation is the change in the price level of consumer goods and services between the current month and the same month of the previous year. Monthly inflation is the change in the price level between the current month and the previous month.
A contributor shows how much a specific component of the Harmonized Consumer Price Index (HICP) contributes. Contributions are calculated according to a method that guarantees their association (taking into account the possibility of rounding).
Central bank policies, such as interest rate adjustments, can affect inflation. Lowering interest rates may stimulate spending and investment, which could increase inflation, while raising interest rates can help contain inflation.
Eurozone and EU data indicate the compositions of the countries involved at a specific time. Changes to the composition of these assemblies are incorporated using the string pointer formula.
Why is the final core CPI important in assessing inflation trends in the Eurozone?
The final core consumer price index (core consumer price index) is important in assessing inflation trends in the Eurozone for several reasons:
Exclusion of volatile goods: The final core CPI excludes food and energy prices, which are often subject to volatility. This provides a clearer picture of underlying inflation trends, and helps policymakers focus on ongoing inflation pressures.
Monetary Policy Guidance: The ECB uses the final core CPI as the main indicator when formulating its monetary policy. A higher core CPI may prompt the ECB to consider tightening monetary policy to curb inflation, while a lower core CPI may lead to more accommodative measures.
Economic stability: Analysis of CPI trends helps assess the overall economic situation. Stable or moderate increases in the core CPI indicate that the economy is growing without hyperactivity, while sharp increases may indicate inflationary pressures.
Market competition: The level of competition in different markets can affect pricing strategies. In highly competitive markets, companies may be less able to raise prices, while in less competitive markets, prices may rise more easily. Consumer expectations: If consumers expect prices to rise, they may adjust their spending behavior, which could predict that prices will actually rise.
Inflation Expectations: The final core CPI affects the inflation expectations of consumers and businesses. If the core CPI rises, it could lead to expectations of future inflation, influencing spending and investment decisions.
Comparative analysis: Investors and economists use core CPI data to compare inflation trends across different regions or countries, aiding in international economic assessments and investment decisions.
Overall, the final core CPI is an essential tool for understanding inflation dynamics and guiding economic policy in the Eurozone.
What factors contribute to the volatility of the final core Consumer Price Index ?
Volatility in the final core consumer price index (CPI) can be affected by several factors, including:
Consumer demand: Changes in consumer spending patterns can affect prices. Increased demand for goods and services can lead to higher prices, while lower demand can stabilize or lower prices.
Supply chain disruptions: Disruptions in supply chains, whether due to natural disasters, geopolitical tensions, or pandemics, can lead to shortages of goods, leading to higher prices.
Labor costs: Wage growth and employment levels affect production costs. Higher labor costs can increase the prices of goods and services, while wage stagnation may keep prices stable.
Production costs: Changes in the costs of raw materials and manufacturing processes can affect prices. If production costs rise due to higher input prices, companies may charge consumers these costs.
Monetary policy: Central bank policies, such as interest rate adjustments, can affect inflation. Lowering interest rates may stimulate spending and investment, which could increase inflation, while raising interest rates can help contain inflation.
Exchange rates: Currency fluctuations can affect import prices. For example, a weaker euro increases the cost of imports, contributing to higher underlying prices.
Regulatory changes: New regulations, taxes, or tariffs may affect production costs and pricing strategies, leading to fluctuations in the core CPI.
Seasonal trends: Some sectors experience seasonal price fluctuations (e.g. clothing and housing), which may affect the overall core CPI. Consumer expectations: If consumers expect prices to rise, they may adjust their spending behavior, which could predict that prices will actually rise.
Understanding these factors helps explain changes in the final core CPI and assess their effects on the economy.
