Inflation in Germany accelerated at a slower pace than expected in April, reinforcing arguments for the European Central Bank to postpone an interest rate increase this month amid the conflict involving Iran.
Consumer prices rose by 2.9% year-on-year in April, up from a 2.8% increase in March but below the median forecast of 3.1% from a Bloomberg News survey. Earlier regional data indicated that falling package holiday prices offset the impact of rising fuel and heating costs.
This outcome contrasts with Spain, where inflation unexpectedly accelerated to 3.5%. Data from France and Italy will be released on Thursday, alongside inflation figures for the 21-member eurozone, which are expected to show an inflation rate of 3%, the fastest since 2023.
The report is unlikely to provide conclusive evidence for European Central Bank officials meeting this week in Frankfurt. Policymakers will discuss whether two months of conflict in the Middle East have exerted enough inflationary pressure to warrant a monetary policy response.
Although economic indicators—from business surveys to inflation expectations—are signaling caution, there is not yet sufficiently compelling evidence to prompt the ECB to raise its deposit rate from the current level of 2%.
The ECB's stance was summarized by its Chief Economist, Philip Lane, who suggested that officials may still lack clarity this week on the duration and severity of the economic impact from the conflict. Economists and traders anticipate a 25-basis-point rate hike is likely, though not in April—instead, it is expected to occur in June.
Comments