Euro zone inflation soars further above ECB target on oil prices

FRANKFURT, April 30 (Reuters) - Euro ‌zone inflation surged ​further ​in April on soaring energy costs, Eurostat data showed on Thursday, adding to the case for interest rate hikes, ‌even if benign underlying price growth figures ease the ⁠urgency of any move.

Inflation in the 21 countries sharing the euro currency jumped to ‌3.0% this month from 2.6% ‌in March, moving further above the European Central Bank's 2% target, with energy costs accounting for the vast majority of the ​increase.

A closely watched figure on underlying or 'core' inflation, which excludes volatile food and energy prices, meanwhile slowed to 2.2% from 2.3% ⁠a month earlier.

Services inflation, a stubbornly high component of the price basket over the past several ​years, slowed to 3.0% from 3.2% while inflation for non-energy industrial goods, a key drag on prices picked ​up to 0.8%.

The figures are a mixed ‌bag for the ECB, which is meeting on Thursday and will likely keep interest rates unchanged, even ⁠if it signals that policy tightening is increasingly likely.

The high headline inflation print strengthens the argument for interest rate hikes but the underlying figures suggest ⁠that the initial energy shock is not yet creating major second round effects.

The ECB ​is largely powerless against an energy shock but must step in if these second round effects become visible as they risk creating a hard-to-break self-sustaining inflation ‌spiral.

This is why investors expect the ECB to hike its 2% deposit rate already in June and ‌see at least two more moves before the end of the year.

This ⁠outlook is volatile, however, and ‌largely depends on developments ​in the Iran war and oil prices, which hit a four-year-high of $124 on Thursday.

(Reporting by Balazs KoranyiEditing by ‌Alexandra Hudson)

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