Inflation across Europe dipped to an annualized rate of 2.2% in March from 2.3% recorded in February of this year.
Data from statistics agency Eurostat shows that core inflation, which excludes more volatile food, energy, alcohol and tobacco prices, declined to 2.4% in March from 2.6% in February.
Closely watched services inflation, which had been stuck near 4% for months, fell to 3.4% in March.
Among the major economies of Europe, March inflation came in at 2.3% in Germany, 2.2% in Spain, and was unchanged at only 0.9% in France.
The latest inflation reading has bolstered expectations that the European Central Bank (ECB) will lower interest rates at its next meeting on April 17.
Futures traders are now pricing in an 80% chance of an interest rate cut by the central bank in April.
The decline in services inflation is especially positive and raises the chances of an interest rate cut, say economists and analysts.
Separate data showed that the unemployment rate in Europe in February declined to 6.1% from 6.2% at the start of the year.
Unemployment usually declines in low-interest rate environments as businesses can boost their workforces amid cheap borrowing costs.
Despite the positive inflation and unemployment readings, the European Union is bracing for tariffs of up to 25% from the U.S. in coming days.
Economists have warned that U.S. duties on European goods are likely to be inflationary for the continent.
The European Union has said that it plans to implement targeted retaliatory tariffs in response to America’s actions.
