The annual rate for the 20 countries that use the euro was less than the 2.5 percent rate expected by financial markets, making the European Central Bank closer than ever to the 2 percent inflation target.
However, analysts say that the decline from 2.6 percent in February – although welcome – will likely not be enough to prompt the first interest rate cut by the European Central Bank.
Many analysts said the bank will meet on April 11, but the first cut in borrowing costs is not expected until June despite the economy's failure to grow.
The European Central Bank, which is headquartered in Frankfurt, has kept interest rates steady since October 2023 after an intensive campaign to raise interest rates to curb rising inflation.
“The decline in headline and core inflation in March suggests that the ECB is very likely to start cutting interest rates in June,” said Andrew Kenningham of London-based consultancy Capital Economics.
“While core inflation has eased, the stubbornness of services inflation and the ECB’s desire for more wages data make a rate cut in April unlikely,” said Rory Fennessy, chief economist at Oxford Economics.
Food inflation fell to 2.7 percent from 3.9 percent, and energy prices fell by 1.8 percent, according to Eurostat, the European statistics agency.
Meanwhile, core inflation, which excludes volatile food and energy costs, fell to 2.9 percent from 3.1 percent in February.
Inflation fell to 2.3 percent in Germany from 2.7 percent last month, and to 2.4 percent in France from 3.2 percent.
It is noteworthy that inflation in the euro zone has fallen significantly from the peak of 10.6 percent it reached in October 2022 after the Russian war in Ukraine and the subsequent impact on energy costs in Europe.
– Slowdown across the union –
Across the European Union, Lithuania recorded its lowest inflation rate in March, at 0.3 percent, Eurostat data showed.
There was also a good slowdown in consumer price increases in the two EU economies, France and Germany.
Germany recorded an annual inflation rate in March of 2.3 percent, down from 2.7 percent in February.
In France, the inflation reading for March was 2.4 percent, a figure much lower than the 3.2 percent recorded in the previous month.
Other Eurostat data published on Wednesday showed that the unemployment rate in the single currency area held steady at 6.5 percent in February, the same number as in January.
Previous data had set the unemployment rate at 6.4 percent in January, but Eurostat revised this figure in a statement on Wednesday.
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