April flash: +2.6% y/y

MNI survey median: +2.5% y/y
MNI survey range: +2.2% to +2.7% y/y

March final: +2.7% y/y

FRANKFURT (MNI) – Eurozone inflation slowed less than generally
expected to 2.6%, Eurostat estimated Monday.

The annual rate, the slowest since August, suggests that consumer
prices rose by just under 0.5% on the month. An official breakdown will
be published May 16.

Data from the German states showed energy prices still driving
annual inflation rates in April, though less than in past months.
Conversely, clothing and leisure activities, especially package holiday
tours, gave a bigger push, suggesting a rise in the core rate.

In its most recent Oil Market Report, the International Energy
Agency noted that ongoing supply concerns and geopolitical tensions have
muted the impact on oil prices of easing market fundamentals and could
keep prices high in the short run.

“Further surprises almost inevitably lurk around the corner for
both demand and supply,” the IEA cautioned. “But for now at least, the
earlier tide of remorseless market tightening looks to have turned.”

Pipeline price pressures already appear to be easing. The April PMI
polls showed input price inflation slowing to a three-month low, while
output prices declined slightly for the sixth time in eight months.

Moreover, selling price expectations across all major sectors fell
back this month after a pick-up in March, a European Commission survey
showed.

Last week, European Central Bank President Mario Draghi reiterated
that inflation risks were “broadly balanced” in the Eurozone: “There are
upside risks are from oil prices and indirect taxes and also downside
risks from weakness in the euro area.”

The ECB expects inflation to fall below 2% by next year, “assuming
we don’t have further increases in commodity prices and indirect takes
and assuming inflation risks remain firmly anchored,” Draghi said.

“That’s why we look with extreme attention to any sign of
pass-through from prices into wages, because we want to make sure that
inflation expectations remain anchored,” he added.

— Frankfurt bureau, +49-69-720 142; email: frankfurt@marketnews.com —

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