Oil Prices Rise, Eurozone Residents Not Sure Inflation Will Fall Quickly

Illustration of the movement of financial market charts amid concerns that eurozone inflation remains high after a spike in oil and energy prices due to the Iran conflict. (Photo: Anadolu Agency)

Residents of the euro zone are still preparing for high prices. After the Iran conflict triggered a spike in oil and energy prices, consumers in the region expect inflation to remain at a high level.

Launching Xinhua, Tuesday, June 2, the latest survey of the European Central Bank or ECB showed that the median inflation felt by consumers over the past 12 months rose to 4 percent in April. In March, the figure was still 3.5 percent.

The eurozone is a region of EU countries that use the euro currency. The median perceived inflation means the middle figure of consumer perceptions of price increases.

The inflation expectation for the next 12 months also remains at 4 percent. This means that households in the eurozone have not seen the pressure on prices quickly subside.

The survey also showed that inflation uncertainty was still high. Energy prices have soared since the Iran conflict began in late February. The impact is most felt at the price of fuel at filling stations.

This price pressure comes as consumers become more pessimistic about their income. Expectations for nominal income growth for the next 12 months fell to 0.8 percent in April, from 1.2 percent in March.

The economic growth expectation also deteriorated slightly, from minus 2.1 percent to minus 2.2 percent.

The shock to oil prices has pushed euro zone inflation to 3 percent in April. That is well above the ECB's target of 2 percent.

As a result, financial markets expect the ECB to raise interest rates for the first time this year at its next policy meeting. Interest rates are the cost of borrowing money; when they rise, credit usually becomes more expensive.

Xinhua reported that the ECB's consumer expectations survey is conducted online each month for about 19,000 consumers in 11 eurozone countries.