BRUSSELS/FRANKFURT - Euro zone inflation surged beyond expectations last month, mild relief for the European Central Bank, even if much of the jump was likely related to seasonal effects due to the timing of Easter.
Inflation in the 19 countries sharing the euro accelerated to 1.7 percent in April from 1.4 percent a month ago, beating expectations for 1.6 percent, Eurostat data showed on Friday.
More crucially, underlying prices excluding food and energy, a figure closely watched by the ECB, picked up to 1.3 percent from 1 percent, erasing a worrisome dip a month earlier and hitting its highest rate since October on a jump in services costs.
The ECB targets inflation just below 2 percent but has undershot this for the past six years even as it deployed an arsenal of conventional and unconventional tools to boost growth and prices.
But any relief from solid April figures is likely to be short lived as the ECB expects inflation to slowly sink this year and not hit its target over the next three years.
"We don't think that the ECB will read too much into this print," Morgan Stanley said in a note to clients. "As before, it will probably want to look through the Easter-related volatility in the core metric, which remains low when stripping out these effects."
Indeed, the ECB has already announced plans to provide even more stimulus through a new round of ultra cheap loans to banks to help the economy, backtracking on earlier plans to normalise policy after years of extraordinary help.
It now expects interest rates to stay steady through the year but risks are skewed towards an even later lift-off as markets price no hike for the better part of the next two years.
The problem is that growth is faltering, mostly as Germany, the bloc's powerhouse, struggles through an unexpected dip caused by weak export demand for its manufactured goods.
German growth could fall to just 0.5 percent this year, the Bundesbank said on Friday, less than half of the euro zone's rate, and there was no sign yet of a recovery taking hold.
Still, policymakers agree that weakness is merely a dip, not the start of a recession, and a recovery is likely coming in the second half of the year.
Supporting their argument, employment continues to rise and services remain robust, suggesting that weak external demand, partly caused by global trade tensions, were the chief culprit of the slowdown.
Separately, Eurostat said euro zone prices at factory gates eased 0.1 percent month-on-month in March for a 2.9 percent year-on-year rise, falling short of market expectations of a 0.0 percent monthly reading and a 3.0 percent annual gain.
Changes in producer prices are an early indication of trends in consumer prices, because unless they tends to be passed on by retailers and intermediaries to consumes.