Euro area CPI likely to match flash

The final release of the euro-area CPI inflation rate for March, due on 17 April, is expected to match the flash release at -0.1% y/y. Similarly, core CPI will likely match the flash at 0.6% y/y.

Headline CPI was less negative in March than February as energy prices recovered slightly and the weaker euro is making imports more expensive. 

However, core CPI eased from 0.7%, and prolonged low inflation is still a risk. In the medium term, a sustained period of above-trend growth is needed to shrink the spare capacity that exists in the euro-area labour market. 

Wages are a key indicator to watch to gauge the amount of spare capacity. There are signs of solid wage growth in Germany but not yet in the weaker countries.