Eurozone inflation is expected to rise slightly but remain close to ECB's target

From Morningstar: 2025-04-30 08:37:00

In April 2024, headline inflation is predicted to rise by 2.1% from the previous year, slightly lower than March’s 2.2%. Core inflation, excluding energy and food costs, is expected to increase to 2.5%, up from 2.4% in March. European inflation is projected to hit 2.1%, the lowest in six months, close to the ECB’s target, according to Morningstar’s Michael Field. However, the threat of US tariffs looms, potentially reversing the trend.

Service inflation was the main driver of headline inflation in March 2025, with a significant contribution from food, alcohol, and tobacco. Core inflation at 2.5% is positive news for markets, above the ECB’s target. Spanish inflation surpassed expectations at 2.2% year over year, influenced by leisure and culture prices. Goldman Sachs expects German headline inflation to decrease to 2.2% and core inflation to rise to 3.1% due to Easter-related travel services.

The ECB is expected to continue its easing cycle at the next monetary policy meeting on June 5 due to economic challenges. Lower inflation may lead to further interest rate cuts, benefiting equity markets post-tariffs. Allianz’s Research Team believes inflation concerns have diminished, with services inflation declining and disinflationary pressures likely pushing inflation below the 2% target. The ECB recently cut its key interest rate by 25 basis points.



Read more at Morningstar: What to Expect from April’s Eurozone Inflation Data