Why it matters: The goal is to control inflation while preventing recession.
The divergence between overall inflation and underlying core inflation reflects the volatility caused by Russia’s invasion of Ukraine, which pushed energy prices to record levels last year and is a major driver of higher food prices this year. It is This poses a challenge for policymakers trying to keep prices down without slowing growth.
The International Monetary Fund recently said it was important to keep inflation under control while avoiding a recession. Europe’s biggest challenge In the coming months, the continent continues to digest the effects of the war in Ukraine on its economy.
By Country: The Baltics remained strong, while Germany declined.
Inflation rates varied among countries using the euro currency. Double-digit price increases were seen in the Baltics, Slovakia and Slovenia. Some of the larger economies with lower rates are coping with pressure from workers for higher wages to keep up with rising costs of living.
In Germany, Europe’s largest economy, inflation fell to 7.6% from 7.8% in March. Food prices remained stubbornly high and government interventions to curb energy inflation began to take hold.
German public sector workers have secured contracts that will give 2.5 million employees a 5.5% pay rise starting next year. The deal is expected to set a precedent for other wage negotiations and could threaten the European Central Bank’s forecast that eurozone wage growth will peak this year.
Inflation rose slightly to 6.9% in April from 6.7% in March in France, which has been plagued by months of a wave of strikes over the government’s decision to raise the retirement age. climb a little.
In Spain, prices rose to 3.8% in April from 3.1% the previous month as food prices rose despite continued declines in energy prices, which surged to record levels last year.
Next steps: Decision by the European Central Bank.
Inflation data will influence the European Central Bank’s decision on whether to continue raising interest rates to bring down inflation. The bank’s board of directors will meet on Thursday and most analysts estimate he will vote to raise interest rates by a quarter or half a percentage point. The bank raised deposit rates to 3% last month. This is the highest level since October 2008.
