Broad-based euro zone inflation at record high 7.5% in April

pInflation in the 19country currency bloc rose to 7.5 in April from 7.4 in March, in line with expectations, driven by a persistent surge in energy and food prices, data from European Union statistics agency Eurostat showed on Friday. pdivdivdiv classBodysc17zpet90 cdBBJodiv

pAlthough volatile energy costs were the biggest contributor, the rate of energy inflation actually declined compared to March while price growth in food, services and nonenergy industrial goods accelerated further, suggesting that inflation is becoming increasingly broadbased.p

pUnderlying prices, which filter out volatile energy and food prices, also jumped, adding to the ECBs worries that high inflation may prove tough to beat and that a nearly decadelong fight with ultralow price growth is over. p

pInflation excluding food and fuel prices, closely watched by the ECB, rose to 3.9 from 3.2 while a narrower measure that also excludes alcohol and tobacco products, jumped to 3.5 from 2.9. Both figures were well above expectations. p

pStruggling to curb price growth, the ECB is all but certain to cut support for the economy further when policymakers meet on June 9, even if the war weighs on confidence and risks pushing growth into negative territory this quarter.p

pIt will first end bond purchases, probably in July, then consider a rate hike sometime in the third quarter with a second rate move expected before the close of the year.p

pPolicymakers‘ big concern is that longerterm inflation expectations are rising well above their 2 target, indicating waning confidence in the ECB’s ability to control prices and ultimately deliver on its mandate. p

pA key gauge of longterm inflation expectations rose to 2.5 on Friday but even some survey based indicators are now showing readings above 2. p

pMarkets are currently pricing in 90 basis points of rate hikes for this year or between 3 and 4 hikes, which would put the ECBs 0.5 deposit rate back into positive territory for the first time since 2014.