• Prior +2.6%
• Core CPI +2.2% vs +2.2 y/y expected
• Prior +2.3%

Well, the headline reading is the highest since September 2023 and it reaffirms the impact of surging energy prices. When looking at core annual inflation, we’re still not seeing any spillovers yet as the reading there is softer than it was in March even.

Looking at the breakdown, food price inflation was seen at 2.5% with energy price inflation rising the most on a yearly basis by 10.9%. Services inflation also continues to keep sticky at 3.0% even if down from 3.2% previously. At the balance, that is still keeping core prices above the 2% threshold and it’s still not quite ideal for the ECB even if the Middle East conflict were to not happen.

But now, the picture has completely changed because of the US-Iran war. The prudent step by the ECB is to stay on the sidelines but they’re not in an enviable spot in making a choice as we look to June.

Circling back to the report, the monthly estimates also reaffirm the jump in energy prices mostly with that being up 3.0%. Food price inflation was only up 0.5% on the month with services inflation up 1.1% in April.