07:10 AM EDT, 04/01/2025 (MT Newswires) -- Eurozone inflation is receding as expected and will likely dip below the European Central Bank's target of 2% year over year in the months ahead, said Berenberg.

In March, consumer prices rose by 2.2% year over year, in line with Reuters consensus expectations and the bank's call, down from the 2.3% inflation rate in February.

"Crucially,2 Tuesday's data showed price pressures in the slower-moving core and services aggregates are also receding, stated Berenberg.

This supports the bank's call that the ECB can cut its deposit rate once more by 25bps in Q2 to a terminal rate of 2.25%, with the risk tilted towards an additional such move.

While inflation in the United States and the United Kingdom remains elevated, putting a limit on how much the Federal Reserve and Bank of England can cut rates, the ECB has more leeway to react to a potential short-term deterioration of the eurozone economy, according to Berenberg.

However, there is a risk that eurozone inflation turns up again in the years ahead, especially if government deficits remain elevated. As a consequence, the bank expects the ECB will have to raise its deposit rate again, to 3% in 2027.