Price growth on an annual basis in the 17 countries that share the euro continued to increase at the beginning of the second quarter, boosting expectations for the central bank to tighten fiscal policy, according to The Daily Telegraph. On Friday, the European Union reported that inflation in the eurozone increased by 2.8% in April from one year earlier, moving up form the 2.7% year-over-year increase recorded in the previous month. Despite the divergence between the outlook for leading and debt-burdened economies, Barclays Capital is forecasting “a series of rate hikes” by the European Central Bank.
The ECB increased its benchmark interest rate to 1.25%, with inflation remaining well above policymakers target level of just under 2% price growth. A separate report on consumer confidence showed that sentiment in the region declined by the largest amount since the eurozone sovereign debt crisis exploded last May. Howard Archer of IHS Global Insight said that the data represented, “Disappointing news overall on the economic activity front.”
