Inflation Rises, ECB Faces Tough Call on Interest Rates

Plans to cut interest rates in the eurozone may be on hold after inflation came in higher than expected in April, raising new concerns for the European Central Bank (ECB).

New data from Eurostat shows prices rose 2.2% compared to last year, slightly more than the 2.1% economists predicted. Even more worrying, core inflation, which leaves out food and energy, jumped to 2.7%, its first increase in nearly a year.

This unexpected rise, mainly driven by higher service costs, could slow the ECB’s efforts to start lowering interest rates, which have remained high to fight inflation.

“This isn’t what the ECB wanted to see,” said economist Maria Keller. “The numbers make a rate cut in June much less certain.”

Markets had been hopeful for a rate cut soon, but now the central bank may need more time before making a move. With inflation still above its 2% target, the ECB must decide whether to hold steady or risk cutting too soon.

All eyes are now on ECB President Christine Lagarde, who is expected to address the bank’s next steps in the coming days.