On April 19, 2025, shoppers will buy fresh vegetables, fruits and herbs at the outdoor agricultural market.
Michael Nguyen/Nurphoto via Getty Images
Eurozone inflation had not changed at 2.2% in April, causing expectations for lower movements, which were shown on Friday, with flash data from the statistical agency Eurostat.
Economists voted by Reuters expected reading to arrive at 2.1% in April, compared to 2.2% in March, as inflation is eased towards the European Central Bank’s 2% target.
Core inflation, which excludes more volatile foods, energy, alcohol and tobacco prices, accelerated to 2.7% from 2.4% in March. The closely watched service inflation print was also featured again, coming in at 3.9% compared to previous 3.5% reads.
The euro was higher against the US dollar and British pound after data release. Bond yields have remained largely unchanged, with German bond yields continuing to rise by around 3 basis points over the course of 10 years.
Franzis Capalmas, a senior European economist in capital economics, said in a memo that the increase in service inflation is “mainly driven by the Easter timing effects.” These effects will reverse next month, she added, suggesting that this has kept the door open for further interest rate cuts from the European Central Bank.
“We believe service rates will drop significantly for the remainder of the year as US tariffs continue to strain activities and the labor market continues to weaken,” Palmas added.
Meanwhile, Morningstar’s chief equity strategist Michael Field called for caution, saying that tariff uncertainty “means that every level of comfort here is unstable.” Further escalation of tariff tensions would mean European inflationary efforts, he said.
Field added that there is still a reduction in ECB rates on the table. “This relatively low level of headline inflation has kept pressure from the ECB, allowing the ECB to further lower interest rates,” he said.
ECB President Christine Lagarde told CNBC last week, “The discovery process is on a very good pace as we are heading towards (inflation) targets during 2025, and we are approaching completion.”
Lagarde and other policymakers warned last week that inflation photos were less clear in the medium term, with factors like potential measures for retaliation from Europe against US tariffs and fiscal changes like Germany’s major infrastructure packages.
Lagarde said the ECB will be “extremely dependent data” when making interest rate decisions. The central bank last month cut interest rates, cutting its key fees (deposit facilities) to 2.25%, down from 4% in mid-2023.
Several major eurozone economies had released their latest inflation figures at the beginning of the week. German Statistics Bureau said Wednesday it expects consumer prices to rise 2.2% in April, lower than the previous month’s reading, but slightly higher than expected. Meanwhile, France’s harmonious inflation was 0.8%, slightly surpassing expectations.
Data released earlier this week shows that the eurozone economy could increase steam as the bloc’s gross domestic product rose 0.4% in the first quarter of 2025, according to preliminary readings. This was higher than the 0.2% forecast, following the 0.2% growth printing revised in the last quarter of 2024.
However, global tariff fallout is widely expected to slow growth in the coming months.
