Inflation in the euro area remains well above the ECB’s target as energy and food prices rise.
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Inflation in the euro area reached a record high for the sixth consecutive month, raising additional questions about how the European Central Bank will react.
Core inflation in the 19-nation region reached 7.5% in April, according to preliminary estimates by the European Statistical Office. In March, the figure reached 7.4%.
European Central Bank Vice-President Luis de Gindos tried to reassure lawmakers about rising prices on Thursday, saying the eurozone is close to peak inflation. The central bank sees price pressures easing in the second half of this year, although energy spending is expected to maintain relatively high inflation.
The latest report on inflation comes amid concerns about the ongoing war in Ukraine and the subsequent impact on Europe’s energy supply – and how this could affect the region’s economy.
Rising energy prices contributed the most to inflation in April, although they were slightly lower than in the previous month. Energy prices rose 38% in April on an annual basis, compared to 44.4% in March.
Earlier this week, Russia’s energy company Gazprom cut off gas flows to two EU countries for failing to pay for goods in rubles. The move raised fears that other countries could also be cut off.
Analysts at Gavekal, a financial research firm, said that if Gazprom also cut supplies to Germany, “the economic effects would be catastrophic.”
In Italy, meanwhile, central bank estimates point to a recession this year if Russia cuts off all energy supplies to the south.
Overall, the EU receives about 40% of Russia’s gas imports. Reduced flows can severely affect households as well as companies that depend on goods to produce their goods.
Speaking to CNBC on Friday, Alfred Stern, CEO of one of Europe’s largest energy companies, OMV, said it would be almost impossible for the EU to find alternatives to Russian gas in the short term.
“We need to be pretty clear: in the short term, it will be very difficult, if not impossible, for Europe to replace Russian gas flows. So this can be a medium to long-term debate, but in the short term, I think we need to stay focused and make sure that we also support European industry, European households supplied with gas, “Stern said.
Some data released on Friday also show a GDP (gross domestic product) rate of 0.2% for the euro area in the first quarter.
“Among the Member States for which data are available for the first quarter of 2022, Portugal (+ 2.6%) registered the largest increase compared to the previous quarter, followed by Austria (+ 2.5%) and Latvia (+ 2.1%). registered in Sweden (-0.4%) and Italy (-0.2%) “, the statement said.
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