Europe’s painful inflation inched higher in April, extending the squeeze on households and keeping pressure on the European Central Bank to unleash another large interest rate increase, according to AP News.
Consumer prices in the 20 countries using the euro currency jumped 7% in April from a year earlier, just down from the annual rate of 6.9% in March, the European Union statistics agency Eurostat said Tuesday.
Food prices eased a little, falling to an annual 13.6% from March’s 15.5%, while energy prices rose a more modest 2.5%.
Core inflation, which excludes volatile food and fuel, slowed slightly but was still high at 5.6%, underlining the expectation that the ECB will press ahead with its campaign to beat inflation into submission with rate hikes.
Analysts say the ECB’s meeting Thursday in Frankfurt could end in an increase of a quarter- or a half-percentage point. A quarter-point hike would be a moderation in the bank’s series of rapid increases, while a half-point would underline concern that inflation is still not heading back toward the bank’s goal of 2% considered best for the economy.
This bout of inflation was initially spurred by high energy prices tied to Russia’s invasion of Ukraine: Moscow cut off most of its natural gas supplies to Europe, and there were fears the war would take large amounts of oil off the market.
Rate increases are central banks’ chief tool against inflation. Higher rates increase the cost of credit for consumer spending or business investment, and thus cool off the demand for goods.
But the rapid course of monetary tightening by both the ECB and the U.S. Federal Reserve have raised concerns about the impact on economic growth. The U.S. is still stalked by fears of a recession, while the European economy barely scraped out growth in the first three months of the year with a meager 0.1% rise in output.