The next interest rate decision by the ECB is due on Thursday.
(Photo: dpa)
Frankfurt Price pressure in the euro area increased slightly in April. Consumer prices rose by 7.0 percent compared to the same month last year. This was announced by the European statistical office Eurostat on Tuesday based on an initial estimate. Economists had expected it.
The much-watched core inflation rate is now 5.6 percent, after 5.7 percent in the previous month. The inflation rate adjusted for energy and food is considered a good indicator of the medium-term price trend.
The European Central Bank (ECB) will decide on the interest rate level in the euro area on Thursday. Another interest rate hike is considered almost certain. However, it is unclear whether the monetary authorities will opt for another rate hike of 50 basis points or 25 basis points.
After a series of hikes since last summer, the key interest rate in the euro area is now 3.5 percent. The deposit rate that banks get on excess deposits they hold with the central bank is 3.0 percent.
Commerzbank economist Christoph Weil sees the continued stubborn core inflation as an argument for further tightening of monetary policy. Not much has changed here: “The pressure on the ECB remains high to further raise the key interest rate.” Weil assumes that companies have now passed on a large part of the energy price-related increase in production costs to consumers.
Now, however, a new wave of costs is imminent with the sharp rise in wages. In particular, this will continue to drive up prices for services.
The collective bargaining parties in the public sector in Germany recently agreed on significant wage increases. On average, wages and salaries are expected to rise by around eleven percent from March 2024, and by up to 16.9 percent for lower salary groups.
More to come.