The slow decline in inflation confuses the calculations of the European Central Bank

Portugal’s inflation rate fell significantly in April, supported by lower energy prices. In the Eurozone, however, it rose slightly, causing concerns about price developments. In particular, both in Portugal and in the single currency space, core inflation – which excludes unprocessed food and energy products, with more volatile prices which have been at the basis of the current escalation – is at a high level, outpacing even the general index. In other words, inflationary pressures have spread throughout the economy and are now becoming more persistent, economists warn. They concede that inflation will continue to fall, but warn that the decline will be slow, which could force the European Central Bank (ECB) – which meets on Thursday, already after closing this issue of the economics section – to make larger interest rate increases to bring inflation back to 2%.

Year-on-year inflation in Portugal, measured by the Consumer Price Index (CPI), fell to 5.7% in April, compared to 7.4% in March, according to the National Institute of Statistics (INE) rapid estimate. This is even without the effect of the zero value-added tax measure on 44 food commodities, where prices were collected for April, according to the National Institute of Statistics, before it went into effect. Looking at the Harmonized Index of Consumer Prices (HICP) – the benchmark in Europe – it fell from 8% to 6.9%. In the eurozone, inflation rose slightly, from 6.9% in March to 7% in April, halting a streak of declines for five consecutive months.

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