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Back down to earth with a bump.

Inflation in the eurozone has registered its biggest pull back since December 2014, tumbling to 1.5 per cent in March after a surge to 2 per cent in the month before.

Economists at the European Central Bank will be feeling vindicated by the numbers, after coming under heat for forecasts which suggested that average consumer prices would still fall below target in 2019.

The start of the year saw inflation surge on the back of volatile food costs – driven by a shortage of vegetables in southern Europe – and higher oil prices. But more dovish ECB policymakers have insisted the main conditions for sustained inflation – including rising wages – are still missing in the eurozone’s economic recovery.

A key measure of core inflation, which strips out energy and food, also slipped more than expected to 0.7 per cent from 0.9 per cent – its lowest level in a year.

That should take some of the pressure off the ECB in having to justify carrying on with its stimulus measures until at least the end of the year.

Most economists think inflation has already peaked for the year as oil prices stabilise and a number of seasonal factors fade from the inflation basket.

Cathal Kennedy at RBC Capital Markets thinks the figures will help the ECB stick the course and “adopt a similar dovish stance to that taken by a number of ECB officials this week as they continue to pushing back against markets’ hawkish interpretation of the March meeting”.

Although headline inflation will struggle to hit the heights of 2 per cent again this year, core inflation should show more signs of life.

Giada Giani at Citi forecasts the core rate will accelerate to 1 per cent next month due to Easter falling in April. Still, she warns there will be “a high degree of uncertainty around these core forecasts”.

“Any sustained appreciation of the euro could easily derail this trend (as happened in 2016), as could further oil price declines pushing headline inflation lower.”

For all the talk of ECB tapering in the markets, Jack Allen at Capital Economics thinks the central bank will keep the faith with its low interest rate and asset purchase programme “well into 2018″.

He notes “there is still little sign that declining unemployment is putting much upward pressure on wages”.

“And while we expect oil prices to rise, energy inflation should still slow this year. As a result, headline inflation looks set to fall well below the ECB’s target (of just below 2 per cent)”.

The ECB’s next major meeting will come in June, with markets ahead of today’s figures specualting on a possible shift in the ECB’s guidance on interest rates.

Reinhard Cluse at UBS thinks there will be a shift in the guidance away from an “easing bias” in June, but the prospect of rate hikes during the QE programme is not on the cards:

Our call remains that the ECB will announce, on 7 September, that it will start to taper QE as of January 2018, over 6-9 months.

Our base case scenario remains that – in line with the ECB’s guidance – interest rates will only rise once QE has ended. After some confusion in the markets in recent weeks, we would expect the ECB to reiterate firmly in the upcoming meeting on 27 April that rates will only rise after the end of QE.

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