2nd Dec 2023

Eurozone inflation creeps up ahead of ECB rate decision

  • The ECB meeting on Thursday in Frankfurt could result in a quarter- or half-percentage point rise (Photo: Council of the EU)
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Annual inflation in the eurozone rose to seven percent in April, according to the EU's statistics agency's data published on Tuesday (2 May), the first increase after a five-month decline.

It is estimated to be up from 6.9 percent in March, according to the estimate of Eurostat, which could decide how big the European Central Bank (ECB) interest rate hike will be on Thursday.

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The ECB has raised rates repeatedly since July last year to rein in inflation, and analysts expect the bank to raise it once again — although experts are divided on how big the rise should be.

Following Russia's invasion of Ukraine last year, energy prices soared and pushed consumer prices up, hitting 10.6 percent last October.

Food, alcohol and tobacco are expected to have the highest annual rate in April (13.6 percent, compared with 15.5 percent in March), followed by non-energy industrial goods (6.2 percent, compared with 6.6 percent in March).

Services rose by 5.2 percent, compared with 5.1 percent in March and energy prices were up once again by 2.5 percent, compared with prices falling by 0.9 percent in March.

The slight increase in April in headline consumer prices is likely driven by the increase in energy prices.

However, the eurozone's core inflation, which does not include food and energy prices, fell slightly to 5.6 percent in March from 5.7 percent a month earlier, for the first time in 10 months. It is still far higher than the ECB's target of two percent.

Latvia continues to have the highest inflation at 15 percent, followed by Slovakia, Lithuania and Ireland — all dealing with a double-digit rise in inflation in the 20-member eurozone.

Inflation in Germany, the EU's biggest economy, slipped to 7.6 percent in April from 7.8 percent in March, but in France, consumer prices rose 6.9 percent last month after 6.7 percent in March, Eurostat said.

Italy's central bank chief Ignazio Visco has recently warned against further raising interest rates to tackle inflation, but prominent hawks like Dutch central banker Klaas Knot are pushing the ECB to keep raising rates into the summer.

The ECB's meeting Thursday in Frankfurt could result in a quarter- or half-percentage point boost.

A smaller hike would be a moderation in the bank's policy, while a larger increase would signal that the bank is still concerned about the trend in core inflation.

The US Federal Reserve is also due to decide on its rate on Wednesday.


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