Inflation in the eurozone accelerated to 3.0% in April, up from 2.6% in March, according to Eurostat. The main driver: energy prices, which surged 10.9% year-over-year. Services inflation eased slightly to 3.0%, while food, alcohol, and tobacco ticked up to 2.5%.
The energy spike is directly linked to the ongoing Iran war and the blockade of the Strait of Hormuz. International Brent crude briefly traded above $126 a barrel Thursday morning, a wartime record.
At the same time, economic growth in the euro area stalled. First-quarter GDP grew just 0.1% from the previous quarter, a slowdown from 0.2% in Q4 2025. The combination of rising prices and near-zero growth-stagflation-puts the European Central Bank in a difficult position. The ECB is expected to keep its benchmark rate at 2% on Thursday.
Other central banks are also holding steady. The Federal Reserve and the Bank of Japan both left rates unchanged this week. The Bank of England is expected to do likewise.