Inflation rose 7% in the eurozone ahead of the European Central Bank’s decision on rates

Price tags are seen on fruits as a woman shops at a local market in Nice, France. (REUTERS/Eric Gaillard) (ERIC GAILLARD/)

The painful inflation in Europe continued to rise last month, increasing the household difficulties and kept the pressure on European Central Bank to approve another big increase in interest rates.

The consumer prices in the 20 countries that use the euro up 7% in April compared with a year earlier, after 6.9% in March, the city’s statistics agency said on Tuesday. European UnionEurostat.

The increase over the prices of the meal got a little better 13.6% year-on-year compared to 15.5% in March, while the prices of the energy rose at a slower rate than 2.5%

The Underlying inflationwhich excludes volatile food and fuel prices, dropped slightly but it stood tall, to a 5.6%, which raised expectations that the ECB would continue with its campaign to control inflation with rate hikes. The question was how fast the bank could move.

Analysts pointed out that the ECB meeting on Thursday in Frankfurt could end with a quarter or half percentage point increase. A quarter of a point would be a more moderate rise than previous rapid interventions by the bank, while a rise of half a point would underscore concerns that inflation is still not returning to the ECB’s 2% target, and is seen as better for the economy.

Signage outside the European Central Bank (ECB) building, in Frankfurt, Germany, July 21, 2022. REUTERS/Wolfgang Rattay
Signage outside the European Central Bank (ECB) building, in Frankfurt, Germany, July 21, 2022. REUTERS/Wolfgang Rattay (WOLFGANG RATTAY/)

Although the slight decline in food inflation That was good news, economists said that was partly due to statistical issues because the bottom numbers before this burst of inflation are already older than the previous year’s baseline, known as the base effect.

More worrisome was underlying inflation, seen as a better measure of price pressure on the economy from demand for goods and higher wages.

This burst of inflation began initially with the high energy prices associated with the Russian invasion of Ukraine. Moscow cut off almost all its supplies of natural gas to Europe and it was feared that the war could take a lot of crude oil off the market.

He demand rebound after the height of the COVID-19 pandemic and the supply problems of parts and raw materials also played a role. But since then, the factors driving inflation have expanded from energy to food, and the workers have begun to demand higher wages to compensate for their reduced purchasing power.

Economists at UniCredit and Deutsche Bank said it was more likely that the ECB raise the rates in a quarter point.

The rate hikes interest rates are the main tool of central banks against inflation. higher rates increase the cost of credit for consumer spending or business investment, which reduces demand of goods.

But the rapid succession of monetary adjustments of the ECB and the Federal Reserve of the United States has raised fears impact on economic growth. The United States has not yet outgrown the fear of a recessionwhile the European economy barely scratched any growth in the first three months of the year, with a meager 0.1% growth in output.

Analysts signaled that the Fed could raise interest rates by a quarter point on Wednesday, potentially ending its series of hikes.

(With information from AP)

Keep reading:

The Italian government approved labor measures on Workers’ Day: tax reduction, cut subsidies and more flexibility

Lula da Silva announced a project that readjusts the minimum wage above inflation