Eurozone Inflation Continues to Fall, as Energy Prices Ease

The eurozone’s rate of inflation fell sharply in March, as energy prices across the region continued to fall from record levels reached last summer, but prices for food remained stubbornly high.

Prices rose 6.9 percent over the year through March for the 20 countries that use the euro, down from an 8.5 percent annual pace in February, the European Union’s statistical office said on Friday. Largely driving the drop was the cost of energy, which soared last year after the invasion of Ukraine and has fallen this year as Europe has pivoted away from a reliance on Russian fuels.

But the price of food rose at an annual rate of 15.4 percent, a record, compared with 15 percent in February.

And with both food and energy taken out of the mix, the so-called core rate of inflation ticked higher to 5.7 percent, from 5.6 percent in February. That increase, which can reflect wages and the rising cost of services, is a sign of underlying inflation pressures persisting in the economy.

Economists said that because of the rapid drop in energy prices, the European Central Bank would need to focus on bringing down other prices reflected in the core rate.

“Because it was so widely known that energy inflation would drop like a stone, the bigger concerns remain around the other components,” said Bert Colijn, a senior economist with ING. “This is where a lot more work needs to be done.”

After six rate increases since September, the European Central Bank has said it will observe the situation before committing to any further rate moves, but the bank’s president, Christine Lagarde, has stressed that she remains committed to bringing inflation in line with the bank’s target of 2 percent.

Earlier this month, the E.C.B. increased rates by half a percentage point, despite turmoil in financial markets caused by the collapses of Silicon Valley Bank and Credit Suisse of Switzerland. Economists have warned that jitters in the banking sector could force the bank to pause at upcoming meetings.

Inflation rates diverge across the countries that use the euro, with those most exposed to the rapid cutback in Russian gas imports suffering the highest price increases. But for the first time since October, all members recorded inflation rates below 20 percent, although six countries remained in double-digit territory.

The largest countries, including Germany, France, Italy and Spain, all saw significant drops from the previous month in the annual pace of inflation, although only Spain recorded a lower rate from a year earlier — 3.1 percent, versus 9.8 percent last March.

Still, Spaniards paid 16 percent more for food this March than last year, despite a series of government interventions that include dropping value-added tax on foods such as bread, cereal, cheese, milk, fruit and vegetables. The government in Madrid also cut taxes on energy bills.

Food prices were also the main driver of inflation in Germany, Europe’s largest economy, where year-over-year price increases slowed to 7.8 percent, from 9.3 percent in February, as energy prices stabilized at a lower level, helped by a relatively mild winter and conservation efforts by businesses and consumers.

But Isabel Schnabel, a member of the European Central Bank’s executive board, noted this week at an event in Washington that it could take a while for the fall in energy prices to be reflected in the broader economy.

“It may not drop out as quickly as it moves in,” Ms. Schnabel said.