Eurozone consumer price inflation accelerated to 3.0% in April 2026, the highest reading since September 2023 and well above the European Central Bank's 2% target, official data showed Thursday. The surge was driven primarily by energy costs, which rose 8.2% year-on-year as the Strait of Hormuz standoff kept global oil prices above $100 per barrel.
The inflation print arrived alongside a troubling growth picture. Eurozone GDP expanded by just 0.1% in Q1 2026, missing consensus expectations of 0.3%, as weakness in Germany and France weighed on the bloc's aggregate output.
ECB Response
ECB President Christine Lagarde confirmed that the April policy decision to hold rates was unanimous, but acknowledged that a hike had been "seriously discussed." Bundesbank President Joachim Nagel was more explicit, warning that the ECB might need to raise its key rates "as early as June" if energy-driven inflation continues to broaden into underlying price pressures.
Markets now fully price in one ECB rate hike by July, with a second increase expected before year-end.
EUR/USD Impact
EUR/USD recovered from three-week lows near 1.1640 to trade back above 1.1700 as rate hike expectations supported the single currency. The pair faces resistance at the April high of 1.1788; a break above would put the multi-year high near 1.19 back in focus.
The stagflationary backdrop — high inflation combined with anaemic growth — complicates the ECB's communication task considerably, as rate hikes risk deepening the growth slowdown while inaction risks embedding inflation expectations.