Euro Area: Inflation unexpectedly ticks up in April
Harmonized inflation rose in April, surprising markets on the upside, increasing to 7.0% from March’s 6.9% reading. As a result, inflation moved further away from the European Central Bank’s target rate of 2.0%.
March’s result was due to prices for energy swinging from a decrease in March—due to strong negative base effect—to a year-on-year increase in April, as well as a faster increase in prices for services. On the flipside, prices for non-energy industrial goods and for food and alcohol and tobacco rose at slower paces. Meanwhile, the annual rate of core inflation—which excludes volatile energy and unprocessed foods prices—declined to 7.3% in April from March’s 7.5%, which had marked the highest print since records began.
On a monthly basis, harmonized consumer prices increased 0.7% in April, decelerating from March’s 0.9% rise.
Commenting on the outlook, Bert Colijn, senior economist at ING, stated:
“Over the last year, inflation in the eurozone, which started as a supply-side issue, has become a demand-side issue. This is a clear invitation for the ECB to continue hiking interest rates. While there is very little a central bank can do to lower oil prices or to stop a war, there’s a lot a central bank can do to stop too much money chasing too few goods: bring down demand. And this is exactly what the ECB will continue doing on Thursday.”