Inflation in the eurozone rose more than expected in April, complicating the European Central Bank’s (ECB) plans to lower interest rates. According to preliminary data from Eurostat, consumer prices increased by 2.2% year-on-year, slightly above the 2.1% forecast, and rose 0.6% month-on-month, suggesting that the recent disinflation trend may be stalling.

Of greater concern to the ECB, core inflation (which excludes volatile food and energy prices) climbed to 2.7%, marking the first increase since May 2024. Services inflation, a key indicator for the ECB, accelerated notably to 3.9% annually.

Price pressures varied across the eurozone, with Estonia recording the highest inflation at 4.4% and France posting the lowest at 0.8%.

Despite the uptick in inflation, financial markets remained steady. Investors appear confident that the ECB will proceed with a rate cut in June, viewing the latest figures as a temporary spike rather than a sustained trend. Bond yields and the euro showed little reaction, and equity markets continued their rally, supported by strong corporate earnings. Major gainers included Rheinmetall, ING Groep, and Airbus, while Munich RE and RWE saw losses.

Overall, while inflation remains a challenge for policymakers, investor sentiment has remained resilient, focusing instead on positive earnings and growth prospects.