The inflation rate in the euro area was 7 percent in April. This was announced by the European statistical office Eurostat in Luxembourg on Tuesday after an initial estimate. In March, the rate was 6.9 percent, down from 8.5 percent in February.
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This means that the sharp decline in the rate from March did not continue in April. Among other things, it was due to a so-called statistical base effect, since March, energy prices from this year, for example, have been compared with those that have already risen from the months after the start of the Ukraine war last year; this dampens the rates from a purely technical point of view.
Differing trends depending on the euro area
Depending on the euro area, the development in April was somewhat different. For example, the inflation rate in Spain, where it had previously been relatively low, rose in April, from 3.1 to 3.8 percent. In Germany, on the other hand, inflation fell somewhat. According to the national calculation method of the consumer price index (CPI), it fell from 7.4 to 7.2 percent. According to the European method of calculating the Harmonized Index of Consumer Prices (HICP), which is used for comparison with other euro countries, it fell from 7.8 to 7.6 percent.
The reasons were different: In April, there had been several developments that had an opposing effect on inflation. In Germany, for example, for the first time in a year and a half, food prices had become cheaper on average compared to the previous month. Vegetables and fruit, for example, were on average cheaper than in March, albeit significantly more expensive than in April last year. Other goods in the supermarket, such as bread and cereal products, became more expensive. Some products, such as edible fats and oils, had risen sharply in price after the start of the Ukraine war and have now become at least somewhat cheaper again.
Oil price again a driving factor
In the meantime, oil and gasoline had become more expensive in April. The oil organization OPEC plus had announced a production cut before Easter, which had driven up the oil price on the world markets. In addition, there was the wave of travel at Easter, which had probably also favored higher fuel prices. Later in the month, recession worries in America caused oil prices to fall somewhat.
There were some special features due to the early Easter date: As a result, part of the travel wave, which is always associated with higher prices in the travel industry, fell in March. This is said to have had a somewhat distorting effect on the inflation figures.
ECB before the election: 0.25 or 0.5 percentage points?
Persistently high inflation is also likely to be on the agenda of the ECB Governing Council, the eurozone's top monetary policy body, at its May meeting on Thursday. According to a survey, the majority of economists expect an interest rate hike of 0.25 percentage points on Thursday. However, some analysts believe that it could be close to whether the Council will decide on a larger interest rate hike of 0.5 percentage points.
"The inflation outlook remains subject to upside risks despite the continued tightening of credit conditions, while the economy has proven to be much more resilient to higher interest rates and financial stress," Frederic Ducorzet, an economist at Pictet Bank, told the F.A.Z.
A few months ago, the central bank had actually presented steps of 0.5 percentage points as its path in the fight against inflation. Of course, it was clear that this path would not be able to be followed forever. With the turbulence in the banking sector, some members of the ECB Governing Council had become somewhat more cautious about how aggressively the central bank should continue to pursue the course of monetary tightening.
In a recent interview, ECB Chief Economist Philip Lane expressed the view that further interest rate hikes were necessary to bring inflation back close to the ECB's target of 2 percent in the medium term. But he had not commented on the magnitude of the rate hikes. ECB Executive Board member Isabel Schnabel said in an interview that an interest rate hike of 0.5 percentage points was not yet off the table.