Euro zone inflation was stable at 2.2% in April, dashing hopes of many analysts who had expected the upward trend to continue with lower rates. European Central Bank (ECB) has been on an aggressive path to hit its inflation target. New numbers show some storm clouds looming on the horizon.
The services ex-energy sector experienced a particularly sharp jump, with inflation hitting 3.9% in April, accelerating from 3.5% in March. That increase could be indicative of renewed demand in the services sector, even as overall inflation remains plateaued.
Today’s inflation rate is 3.7 percent. At the same time, surprising data indicate that the euro zone’s GDP expanded by 0.4% in Q1 2025. This increase happens against the backdrop of skyrocketing consumer prices in individual EU member states. In Germany, they exploded by 2.2%, a bit more than what the market expected.
Underlying euro zone inflation picked up steam in the bloc, rising to 2.7% in April from 2.4% in March. This last core measure, excluding volatile energy and food prices, indicates underlying pressures on prices continue to be quite stubborn.
French harmonised inflation posted a modest increase, coming in at 0.8% for April, just above expectations. These figures paint a confusing economic landscape throughout the region. As a result, federal policymakers are more deeply engaged in a conversation about the success or failure of our existing monetary policy.
The ECB’s main refinancing rate is currently 2.25%. However, the central bank only recently lowered the rate. Combined, this demonstrates that they are being very deliberate about any future changes in the face of current inflationary trends.
“We’re heading towards our [inflation] target in the course of 2025, so that disinflationary process is so much on track that we are nearing completion.” – Christine Lagarde