The euro zone economy expanded by a meager 0.1% in the first quarter of the year, preliminary data showed on Thursday, as the Iran war hampers growth in the region and inflation pressures intensify.
The print came as flash data showed consumer prices in the single currency area are creeping higher, with inflation jumping to 3% in April, up from 2.6% in the twelve months to March and from 1.9% the month before that.
The data prints come ahead of the European Central Bank’s next monetary policy decision on Thursday, with the bank’s governing council widely expected to hold its benchmark interest rate at 2% as it gauges how inflationary pressures caused by the Iran war, particularly fuel price rises, play out.
Energy costs drove the latest inflation print higher, statistics agency Eurostat said, up 10.9% compared with 5.1% in March. The region’s inflation rate has now leapt above the central bank’s 2% target, putting pressure on policymakers to consider interest rate hikes.
Economists fear Europe could be facing a period of “stagflation” — low growth, rising inflation and unemployment — as the war prompts a global energy crunch, price rises and dents business and consumer confidence.
