A wave of inflation once again swept across Europe. Not so long ago, the region managed to cap the rapid rise in consumer prices. However, it failed to keep it under control. As a result, eurozone consumer prices surged by 7%, which could hardly be a limit.
According to the preliminary estimates from Eurostat, in 20 countries of the eurozone, consumer prices jumped by 7% compared to a rise of 6.9% in March. The price growth turned out to be above the average forecast and considerably exceeded the target level of 2%. The eurozone inflation was mainly driven by a rise in energy and services prices. In April, prices of oil and gas increased by 2.5% on a yearly basis after a 0.9% decline in March. Meanwhile, the price of services added 5.2% compared to a 5.1% increase a month earlier. Prices of food, alcohol, and tobacco showed slower growth of 13.6% compared to a 15.5% rise in March. The growth in the industrial product price index also slackened to 6.2% from 6.6%. At the same time, core inflation, which excludes prices of such volatile products as food, alcohol, tobacco, and energy, slowed down to 5.6% in April after reaching a record high of 5.7% in March.
“The combination of solid (but not stellar) GDP growth, an ongoing deterioration in credit conditions and modestly declining core inflation mean the ECB is likely to hike by 25 basis points on Thursday rather than plump for another jumbo hike,” Jamie Rush, chief European economist, said.