Key Takeaways
- Eurozone inflation increased to 3.0% year over year in April, according to Eurostat’s flash estimate, in line with the consensus forecast.
- Core inflation came in at 2.2% year over year, down slightly from March’s 2.3% and below the consensus forecast of 2.3%.
- Derivatives markets continue to price in up to three ECB rate hikes this year.
Consumer prices in the eurozone increased by 3.0% year over year in April, according to Eurostat’s flash estimate. This compares with March’s reading of 2.6%, as annual energy inflation is estimated to have surged to 10.9%. The headline figure was in line with consensus estimates and remains well above the European Central Bank’s medium-term inflation target of 2%.
This week’s surge in oil prices and inflation expectations has prompted a shift in market pricing for ECB rate moves later this year. Futures markets now price in up to three 0.25 percentage point rate hikes in 2026, with a first move in June increasingly likely.
Core inflation, which excludes volatile components such as energy and food, came in at 2.2% in April, compared to 2.3% in March and slightly below expectations. “There is typically a lag of several months before higher energy prices fully feed into inflation,” says Michael Field, Morningstar’s chief European markets strategist. “These effects are likely to become visible only over the coming months and will depend on how long energy prices remain elevated.”
According to Eurostat’s estimates, energy inflation rose by 10.9% in April, compared with 5.1% in March, while services eased to 3.0%, down from March’s 3.2%.
Food, alcohol, and tobacco prices rose by 2.5%, slightly up from 2.4% in March, and nonenergy industrial goods prices rose by 0.8%, up from 0.5% in March.
Brent crude remains about 50% more expensive than it was before the outbreak of the US-Iran war at the end of February.
What Is the Inflation Outlook for 2026?
The bigger shift, however, lies in the outlook for the rest of 2026. What once looked like a steady disinflation trend has turned into a more uncertain outlook shaped by geopolitical tensions, volatile energy prices, and weakening growth signals across the euro area.
“In the short term, inflation data for April may look somewhat more subdued. Starting in May, however, we expect to see further upward pressure,” says Martin Moryson, global head of economics at DWS. “The actual rise driven by high energy prices will come later: We expect a peak of around 3.5% in late summer, before headline inflation gradually recedes again—primarily due to base effects,” he says.
In March, ECB staff revised their economic growth projections for the eurozone to:
- 0.9% in 2026 (down from 1.2% in its December forecast)
- 1.3% in 2027 (down from 1.4%)
- 1.4% in 2028 (unchanged)
A Mixed Inflation Picture Across the Eurozone
Inflation varied widely across the bloc, with annual rates ranging from 2.3% in Finland to 6.2% in Bulgaria.
Italy’s annual inflation rose to 2.9% in April from 1.6% in March. Germany’s inflation edged up to 2.9% from 2.8%, France’s to 2.5% from 2.0%, and Spain’s to 3.5% from 3.4%.
