Inflation in the euro zone remains well above the ECB’s target, while energy and food prices soar.
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Inflation in the euro area has reached an all-time high for the sixth consecutive month, raising more questions about how european central bank will react
Headline inflation in the 19-member region reached 7.5% in April, according to preliminary estimates from the Europe statistics office. In March, the figure reached 7.4%.
European Central Bank Vice President Luis de Guindos tried to reassure lawmakers about rising prices on Thursday, saying the euro zone is close to reaching peak inflation. The central bank expects price pressures to ease in the second half of this year, although energy costs are expected to keep inflation relatively high.
The latest inflation reading comes amid concerns about the ongoing war in Ukraine war and the subsequent impact on Europe’s energy supply, and how this could affect the region’s economy.
The increase in energy prices was the main contributor to the inflation rate in April, although it was slightly lower than the previous month. Energy prices rose 38% in April on an annual basis, compared to a 44.4% increase in March.
Earlier this week, the Russian energy company Gazprom stopped gas flows to two EU countries for failing to pay for the product in rubles. The 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 off supplies to Germany, “the economic effects would be catastrophic.”
Meanwhile, in Italy, central bank estimates point to a recession this year if Russia cuts all its power supplies to the southern nation.
As a whole, the EU receives around 40% of its gas imports from Russia. Reduced flows could hit households hard, as well as businesses that rely on the raw material 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 must be quite clear: in the short term, it will be very difficult, if not impossible, for Europe to replace Russian gas flows. So this may be a medium-long term debate… but in the short term, I think we should stay focused and make sure we also keep European industry, European homes supplied with gas,” Stern said.
Separate data also released on Friday pointed to a GDP (gross domestic product) rate of 0.2% for the euro zone in the first quarter.
“Among the Member States for which data is available for the first quarter of 2022, Portugal (+2.6%) recorded the largest increase compared to the previous quarter, followed by Austria (+2.5%) and Latvia ( +2.1%. Registered in Sweden (-0.4%) and in Italy (-0.2%),” the statement said.