The eurozone consumer price index stagnated at 2.4% in April, raising concerns about the ECB’s last mile.

Inflation in the eurozone did not slow down in April. The consumer price index (CPI) stagnated this month at the 2.4% annual rate it had already registered in March, according to preliminary data released Tuesday by Eurostat. The core consumer price index, which in this case excludes energy, food, alcohol and tobacco, slowed from 2.9% to 2.7%, one-tenth less than expected. Below the big numbers, services inflation is slowing by three-tenths from the blistering 4% it had been at for five months, but at 3.7% it is still high, especially considering March’s rise to start the year. Holy Week. All this leads to the conclusion that the last phase of the cycle, undertaken by the European Central Bank (ECB) in 2022, will not be as simple as expected recently. The last mile of deflation is a difficult one, and the timing of rate cuts could be challenging, barring a well-publicized rate cut in June.

April inflation data from Germany and France, the region’s two main economies, support the view that the European Central Bank (ECB) will act cautiously in this latest stage of the deflationary process, beyond a larger-than-announced first rate cut in June . .

“The downward trend in inflation in Germany, which has been observed for a year and a half, may now have come to an end. The inflation rate in April, at 2.2%, was at the same level as in March. The main reason was that energy and food prices showed smaller declines or even slight increases compared to the previous year. The rate of core inflation, excluding these two often highly volatile items, fell again from 3.3% to 3%. partly due to the early start of Easter in particular, air travel prices rose unusually in April, with the effect likely to push inflation rates up by around a tenth in May alone. This should also largely explain the slight decline. service inflation rate. Overall, inflation in the sector has fallen and has remained fairly stable for several months, around 3.5%,” explains Ralf Solvin, economist at Commerzbank.

The German bank believes it is likely that the inflation rate in Germany will increase again in the coming months: “In addition to the stabilization of energy prices, a number of special effects also contribute to this. For example, the “Easter effect”. will no longer apply in May. In addition, last year’s fare will no longer be reduced due to the introduction of the German Ticket (a heavily subsidized public transport ticket) in May 2023.

However, they note that the main factor influencing developments in the coming months will be the extent to which companies will be able to pass on higher wage costs to their customers: “Recent slightly stronger short-term service price growth (y/y) growth over the past six months has recovered somewhat from the start of the year) shows that companies have partially succeeded in doing so, at least for now. We assume that this will continue to be the case in the coming months and that core inflation will therefore stabilize at around 3%.”