Why it matters: The goal is to control inflation while preventing recession.
The split between headline inflation and core core inflation reflects the volatility caused by Russia’s invasion of Ukraine, which pushed energy prices to record highs last year and was the main factor behind higher food prices this year. It presents a challenge to policymakers looking to keep prices in check, while not stifling growth.
The International Monetary Fund recently said that taming inflation while avoiding recession was Europe’s biggest challenge in the coming months, as the continent continues to absorb the impact of the war in Ukraine on its economy.
Country by country: Rates remained high in the Baltics, but decreased in Germany.
Inflation rates varied across countries using the euro currency. The Baltic countries as well as Slovakia saw double-digit price increases. Some of the larger economies with lower rates are dealing with pressure from workers seeking higher wages to keep up with the rising cost of living.
In Germany, Europe’s largest economy, inflation fell to 7.6 percent from 7.8 percent in March. Food prices remained stubbornly high, while government intervention began to tame the inflated cost of energy.
German public sector workers have reached an agreement to give 2.5 million employees a 5.5 per cent increase in wages starting next year. This deal is expected to set a precedent for other wage talks and could threaten the European Central Bank’s forecast that wage growth in the eurozone will peak this year.
In France, which has been plagued for months by waves of strikes over the government’s decision to raise the retirement age, inflation rose slightly in April, to 6.9% from 6.7% in March, driven largely by energy, but also with service prices. Climbing a little.
In Spain, prices rose to 3.8 percent in April, up from 3.1 percent in the previous month as food costs rose, even as energy prices, which jumped to record levels last year, continued to fall.
What’s next: a decision by the European Central Bank.
Inflation data will influence the European Central Bank’s decision on continuing to raise interest rates in an effort to bring down inflation. The bank’s board of directors meets on Thursday and most analysts estimate it will vote to raise interest rates by a quarter or half a percent. The bank raised the deposit rate to 3 percent last month, the highest rate since October 2008.