Eurozone Inflation Remains Steady, GDP Growth Slows Down Amidst Technical Recession Fears
On April 23, 2024, people were seen walking the streets of Montmartre in Paris, France. Despite concerns about inflation and economic growth, the euro area saw a steady rise in prices with inflation holding at 2.4% in April.
Inflation matched economists’ expectations at 2.4%, with a monthly inflation rate of 0.6%. Core inflation, which excludes energy, food, alcohol, and tobacco, decreased to 2.7% from 2.9% in March. The impact of lower energy prices on a year-on-year basis continued to moderate, with a rate of -0.6% compared to -1.8% in March.
The first three months of the year saw GDP increase by 0.3%, slightly exceeding economist forecasts in the euro area. However, the GDP for the fourth quarter of 2023 was revised from no growth to a 0.1% contraction, indicating that the euro zone was in a technical recession in the second half of the previous year.
Market expectations are growing for the European Central Bank (ECB) to reduce interest rates at its next monetary policy meeting on June 6th due to rising global commodity prices and currency fluctuations affecting trade flows within Europe and beyond its borders.
Several ECB members told CNBC that they anticipate an interest rate reduction in June to prevent an excessive slowdown in the euro zone economy amidst geopolitical tensions and uncertainty surrounding Brexit negotiations.
Analysts at BNP Paribas predict that higher crude oil prices will cause an increase in headline inflation rates which could lead to further cuts in interest rates by mid-year.
The ECB is closely monitoring global developments such as ongoing trade disputes between major economies and rising protectionism which could impact investment decisions and future economic growth prospects for Eurozone countries.
