Sunday, May 22

Euro-Area Inflation Edges Up to Record, Raising Pressure on ECB

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(Bloomberg) — Euro-area inflation climbed to a fresh all-time high, raising pressure on the European Central Bank to remove crisis-era stimulus and lift interest rates.

Consumer prices were up 7.5% from a year earlier in April, in line with the median estimate in a Bloomberg survey. A gauge excluding volatile items such as food and energy jumped to 3.5%.

Energy remains the key driver and was back in sharp focus this week as Russia halted natural gas supplies to Poland and Bulgaria — threatening other European Union members with the same if they don’t pay for fuel in rubles.

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ECB officials have grown increasingly concerned that stubbornly persistent price pressures will lead to more permanent inflation above their 2% goal, signaling that an end to large-scale asset purchases and record-low interest rates may come in the summer.

But these decisions — on the agenda for the ECB’s June 8-9 meeting — are complicated by the extreme uncertainty to the outlook as the Ukraine war hurts confidence and raises fears of energy shortages.

Supply chains are also being squeezed by lockdowns in China, forcing companies like BMW AG and Robert Bosch GmbH to shut factories. The 19-nation euro economy grew 0.2% in the first quarter, and while many analysts still say a recession can be avoided, they see growth momentum — along with inflation — slowing in the second half of 2022.

ECB Vice President Luis de Guindos said Thursday that price pressures are “very close” to peaking, though he warned they won’t fall below 4% this year.

©2022 Bloomberg LP

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