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Investing.com -- The Euro-zone’s headline inflation remained unchanged at 2.2% in April 2025, aligning with broader market expectations and suggesting stability in the region’s economy.
The inflation rate for energy dropped significantly, reflecting a decrease in oil and gas prices, while inflation for "food, alcohol, and tobacco" saw a slight increase.
A notable rise in the core inflation rate, which excludes volatile items such as food and energy, was recorded, moving from 2.4% to 2.7%. This increase was attributed entirely to a surge in services inflation from 3.5% to 3.9%.
However, this jump in services inflation is thought to be temporary, influenced by the timing of Easter, and is expected to reverse in May according to data released earlier in the week.
Despite the rise in services inflation, Capital Economics does not foresee concern from the European Central Bank (ECB), as the effects related to Easter are likely to subside.
Furthermore, the imposition of US tariffs is anticipated to have a disinflationary impact on the Euro-zone, potentially setting the stage for further rate cuts by the ECB later in the year.
In addition to inflation data, there was a slight increase in the unemployment rate, which inched up from 6.1% to 6.2% in March. Other indicators also pointed to a softening labor market, with a decline in the number of services firms reporting labor shortages and a drop in hiring intentions in April.
Capital Economics forecasts that the ECB will proceed with two additional rate cuts this year, which would bring the deposit rate down to 1.75%.
The next ECB meeting, scheduled for June 5, will follow the release of May’s inflation figures by two days, potentially influencing the central bank’s policy decisions.