FRANKFURT (Reuters) – Eurozone consumer price inflation hit a new record high in April that could further complicate the task of the European Central Bank (ECB), already concerned about the risk of a inflation become entrenched and trigger an upward price/wage spiral that is difficult to stem.
The consumer price index calculated by European standards (HICP) is up 7.5% year on year, the first estimate released by Eurostat on Friday shows, a figure in line with the median of Reuters consensus estimates. It had risen 7.4% in March.
Energy prices remain the main driver of the general rise in prices but their surge has slowed slightly, to 38.0% compared to April 2021 after a jump of 44.4% in March.
On the contrary, the rise in the prices of food, alcohol and tobacco accelerated to reach 6.4% year on year, after +5.0% in March, as did that of industrial goods excluding energy ( +3.8% after +3.4%) and those of services (+3.3% after +2.7%), specifies Eurostat.
The inflation rate excluding energy and unprocessed food, the most watched by the European Central Bank (ECB), thus reached 3.9% over one year after 3.2% last month.
An even narrower measure, which also excludes alcohol and tobacco, is up 3.5% after +2.9%.
Both figures are higher than expected.
The ECB, which has made the fight against inflation its priority, is expected to further reduce its support for the economy and credit after its next monetary policy meeting on June 9, despite the slowdown in growth and the deterioration in household confidence linked to the war in Ukraine.
It could thus stop its purchases of bonds on the markets as of July, then consider an initial increase in its key interest rates before the end of the third quarter, then a second at the end of the year.
The institution’s leaders fear above all that longer-term inflation expectations will clearly exceed their 2% target, which would reflect a deterioration in the confidence of economic agents in the central bank’s ability to ensure the stability of price, its main mandate.
On the money markets, the “five-year five-year-ahead” inflation rate, the main barometer of investors’ long-term inflation expectations, currently exceeds 2.5%.
At the same time, markets are anticipating a 90 basis point hike in ECB rates this year, or three or four hikes in total, which would bring its deposit rate, currently set at -0.5%, back into positive territory for the first time since 2014.
(Report Balazs Koranyi, French version Marc Angrand, edited by Matthieu Protard and Jean-Michel Bélot)