Euro-Zone Inflation Jumps Most Since 2022 as War Drives Energy

4zh8z62r82v58vw2[qt]sjh3_media_dl_1.png EurostatArticle content(Bloomberg) — The euro area saw its steepest jump in inflation since 2022 as the Iran war pushed energy costs sharply higher, backing expectations that the European Central Bank will have to raise interest rates.Sign In or Create an AccountEmail AddressContinueor View more offersArticle contentConsumer prices rose 2.5% from a year ago in March – up from 1.9% the previous month and the highest since January 2025. The reading is just below the 2.6% median estimate in a Bloomberg survey.Article contentWe apologize, but this video has failed to load.Try refreshing your browser, ortap here to see other videos from our team.Article contentArticle contentCore inflation, which excludes volatile items like food and energy, unexpectedly slowed to 2.3%, while the closely watched services gauge also eased, Eurostat said Tuesday.Article contentTop StoriesGet the latest headlines, breaking news and columns.There was an error, please provide a valid email address.Sign UpBy signing up you consent to receive the above newsletter from Postmedia Network Inc.Thanks for signing up!A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try againInterested in more newsletters? Browse here.Article contentWith the conflict in the Middle East now extending beyond a month, its effects are increasingly being felt in Europe, where not only inflation but expectations on where prices are headed are picking up markedly.Article contentGovernments and central banks in the region are also slashing their projections for economic growth, while firms are bracing for a hit to demand among their customers.Article contentThe ECB says it won’t to allow a repeat of the inflation spike that followed Russia’s invasion of Ukraine in 2022, vowing to act quickly and decisively as needed. But with no clarity on when the fighting will end, officials are still assessing the toll.Article contentElevated oil and natural gas prices are already casting doubt on the ECB’s baseline outlook for inflation to average 2.6% this year. Under a more extreme outcome, price gains could peak at as high as 6.3% in 2027. Article content“Today we can say that the base-case scenario — for which assumptions were locked in on March 11 — can probably be considered to be the optimistic scenario,” Estonian central-bank chief Madis Muller said earlier Tuesday in Tallinn. “It’s probable that in the coming quarters interest rates will rise.”Article contentArticle contentThat’s certainly what investors think. Markets are pricing as many as three quarter-point hikes in the deposit rate this year, from its current level of 2%.Article contentPowerless to prevent the gyrations in energy markets, the ECB is instead focused on avoiding second-round effects including excessive increases in wages and selling prices. It’s also worried about knock-on effects to things like fertilizer and food prices that help shape households’ perceptions.Article contentA survey published Monday showed consumers’ inflation expectations surged in March, while firms also anticipate marking up their prices sharply. Market-based indicators have also already reacted. Long-dated inflation swaps jumped in the early days of the war, before paring much of the move as traders started to price rate hikes.Article content“It will be essential to monitor expectations closely and to prevent a wage-price spiral, while ensuring that monetary-policy action remains proportionate,” Bank of Italy Governor Fabio Panetta said.Article contentHis homeland saw no uptick in inflation this month, with the reading unexpectedly coming in unchanged at 1.5%. French inflation quickened, but didn’t quite reach 2%. Germany and Spain, which reported numbers earlier, recorded more rapid price increases, of 2.8% and 3.3%.Article contentFurther accelerations are expected and will only add to pressure on the ECB.Article content“The longer the war in Iran lasts and the more destructive it becomes, the greater the risk of inflation will be,” Slovakia’s Peter Kazimir said. “Consequently, the sooner and more decisively we’ll have to respond.” Article content—With assistance from Alessandra Migliaccio, Daniel Hornak, Ott Tammik, Jana Randow, Harumi Ichikura and Joel Rinneby.Article contentTrending Posthaste: Gold's fall from grace could be worse than markets expect News LNG Canada signs key pipeline agreement required for phase two expansion Energy Air Canada CEO likely sealed his own fate in failing to learn from first language misstep, governance experts say Airlines Subscriber only. 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Posthaste: Gold's fall from grace could be worse than markets expect News LNG Canada signs key pipeline agreement required for phase two expansion Energy Air Canada CEO likely sealed his own fate in failing to learn from first language misstep, governance experts say Airlines Subscriber only. Chinese are burying their dead in empty apartments rather than pay skyrocketing cemetery costs Subscriber only Financial Times Air Canada CEO to retire following English-only video controversy Airlines