Inflation rises in Germany and Spain ahead ECB rate decision

16:00

By: Dakir Madiha

Inflation rises in Germany and Spain ahead ECB rate decision

Prices across Europe moved higher in April as Germany and Spain reported fresh increases in inflation ahead of a key monetary policy meeting by the European Central Bank. The latest figures point to persistent price pressures linked to energy markets and geopolitical tensions, particularly the war in Iran, which continues to influence economic conditions in the region.

Germany recorded an annual inflation rate of 2.9 percent in April, up from 2.8 percent in March. The figure matches levels last seen in early 2024 and came in slightly below market expectations. Energy costs remained the main driver of the increase, with fuel and heating prices rising sharply since the escalation of the conflict in Iran. Core inflation, which excludes food and energy, stayed unchanged at 2.5 percent, suggesting underlying price stability despite external shocks.

Spain also reported higher inflation, with the European harmonised index reaching 3.5 percent in April compared with 3.4 percent in March. The national consumer price index, however, eased slightly to 3.2 percent. Economists attributed the divergence to differences in weighting, particularly the stronger influence of energy in the harmonised measure used for European comparison. Core inflation in Spain also slowed to 2.8 percent, reflecting more moderate underlying demand pressures.

The rise in energy prices has become a central factor across both economies. Electricity, fuel and heating costs have increased significantly since the outbreak of the Iran conflict, feeding into broader inflation dynamics across the continent. In Germany alone, fuel prices have risen by around 20 percent over the past year, while heating oil costs have surged even more sharply, adding pressure on households and industry.

Attention now shifts to the European Central Bank, which is expected to keep interest rates unchanged at 2 percent during its upcoming meeting. Markets overwhelmingly anticipate a pause as policymakers assess whether the current inflation spike is temporary or likely to spread more broadly across the economy. The latest data from Germany and Spain complicate that assessment, as they show persistent energy driven inflation alongside relatively stable core price trends.