Wide Eurozone inflation at a record 7.5% in April

Inflation in the Frankfurt-Eurozone hit a record high as expected this month, and European Central Bank (ECB) policymakers are already worried that rapid inflation will take hold and the wage-price spiral will not break. Was there.

Inflation rates in 19 currencies rose from 7.4% in March to 7.5% in April, according to data from the European Union’s statistical agency Eurostat.

Unstable energy costs were the biggest factor, but in reality energy inflation fell compared to March, prices for food, services and non-energy industrial products accelerated further, and inflation became more widespread. It suggests that it is becoming more and more popular.

Almost a decade of fighting ultra-low price growth, in addition to the ECB’s concerns that the underlying prices that exclude volatile energy and food prices have skyrocketed and high inflation may be difficult to beat. finished.

Inflation, excluding food and fuel prices, which the ECB closely monitors, rose from 3.2% to 3.9%, while the narrower index, which also excluded alcohol and tobacco products, surged from 2.9% to 3.5%. Both numbers were much higher than expected.

The ECB is struggling to curb price increases, even as the war puts pressure on confidence and risks pushing growth into the negative territory this quarter, to the economy when policymakers meet on June 9. Further reductions in support are almost certain.

Perhaps we closed the bond purchase first in July, then consider raising rates sometime in the third quarter, with a second rate hike planned by the end of the year.

A major concern for policy makers is that long-term inflation expectations have risen well above the 2% target, and confidence in the ECB’s ability to control prices and ultimately carry out its mission. It shows that it is decreasing.

The key indicator of long-term inflation expectations on Friday has risen to 2.5%, but even some survey-based indicators now show measurements above 2%.

The market is currently pricing at 90 basis points for this year’s rate hike, or 3-4 rate hikes. This will bring the ECB’s -0.5% deposit rate back to the positive territory for the first time since 2014.