Luxembourg Inflation (HICP, ann. var. %, aop)

Inflation in Luxembourg

Harmonized inflation declines to lowest level in two years in March

Harmonized inflation came in at 2.9% in March, down from February’s 4.8%. March’s reading marked the weakest inflation rate since March 2021. The reading was driven by falling prices for transportation and housing and utilities.

Accordingly, the trend pointed down, with annual average harmonized inflation coming in at 7.5% in March (February: 8.0%). Meanwhile, consumer price inflation fell to 3.6% in March, from the previous month’s 4.3%.

Finally, harmonized consumer prices increased 0.18% in March over the previous month, coming in below the 1.41% increase seen in February.

According to the European Commission, inflation should continue to ease slightly this year on a favorable base effect and weaker domestic demand. Moreover, supply-chain issues should continue to ease, and commodity prices should moderate on average from last year.

Nevertheless, our panelists believe that the average harmonized inflation figure in 2023 will hover above March’s print, due to the carry-over from the elevated January and February readings.

The salary and benefits inflation-indexation mechanism—that has been triggered twice in 2023 and could be for a third time in Q4—poses an upside risk to inflation.