Eurozone inflation jumps in March, driven by a sharp surge in oil prices

Eurozone inflation accelerated to 2.5% in March — marking the strongest monthly increase since late 2022 — up from 1.9% in February and just below the 2.6% consensus forecast. The uptick was largely driven by a sharp rise in energy prices, which climbed by nearly 5%. However, softer-than-expected core inflation — which excludes volatile food and energy components — eased to 2.3% from 2.4% previously, offering some relief to policymakers.

The surge in oil prices amid escalating tensions in the Middle East has pushed ECB officials to reconsider the possibility of renewed interest rate hikes, as they aim to contain inflationary pressures and prevent broader economic spillovers.

Economists view the latest inflation spike as a warning that the period of relative price stability — with inflation hovering near the central bank’s target — may be coming to an end. This raises the need for timely policy action to avoid a repeat of the 2021–2022 scenario, when inflation surged to 10.5% and forced the ECB into an aggressive cycle of rapid rate increases.

Going forward, policymakers are expected to closely monitor incoming data, particularly core inflation, which remains the key gauge for underlying price pressures. Market expectations point to up to three rate hikes from the ECB this year, potentially starting as early as April or June, although divisions remain within the governing council regarding the timing and pace of further tightening.